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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Transition Period From _____ to _____
Commission File No. 1-10348
__________________
PRECISION CASTPARTS CORP.
(Exact name of registrant as specified in its charter)
OREGON 93-0460598
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or No.)
organization)
4600 S.E. Harney Drive
Portland, OR 97206 97206-0898
___________________________ ___________________________
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number,
including area code: (503) 777-3881
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, New York Stock Exchange
without par value
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
__________________
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Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of voting stock held by non
affiliates of the registrant as of June 7, 1996 was $876,754,648.
As of the close of business on June 7, 1996 Registrant had
20,569,024 shares of Common Stock, without par value,
outstanding.
Documents Incorporated by Reference
Exhibit 13, the "Financial Section of the 1996 Annual Report
to Shareholders of Precision Castparts Corp." for the year ended
March 31, 1996 is incorporated by reference in Parts II and IV
and appended hereto.
Portions of the Registrant's Proxy Statement dated June 28,
1996 in connection of the 1996 Annual Meeting of Shareholders are
incorporated by reference in Part III.
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FORM 10-K
ANNUAL REPORT
TABLE OF CONTENTS
PART I PAGE
Item 1. BUSINESS 1
Products 2
Sales and Distribution 7
Backlog 9
Competition 9
Research and Development 10
Employees 10
Patents and Trade Secrets 11
Materials and Supplies 11
Government Regulations 12
Environmental Compliance 13
Forward Looking Statements 14
Item 2. PROPERTIES 15
Item 3. LEGAL PROCEEDINGS 17
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 18
Executive Officers of the Registrant 18
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 19
Item 6. SELECTED FINANCIAL DATA 19
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 19
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 20
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT 20
Item 11. EXECUTIVE COMPENSATION 20
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 20
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 21
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K 21
Signatures 24
Financial Statement Schedule 26
Report of Independent Accountants 27
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PART I
ITEM 1. BUSINESS
Precision Castparts Corp. ("PCC" or the "Company"), through
multiple operating divisions, is a leading manufacturer of
complex metal components and products for aerospace and
specialized industrial applications throughout the world.
Through its Structurals Division ("Structurals Division") and
its subsidiary Precision Castparts Corp. - France, S.A. ("PCC-
France"), PCC is a leading supplier to the aerospace industry of
large, complex structural investment castings as well as a
leading supplier of other investment castings from stainless
steel and alloys of nickel, cobalt and titanium. The Company is
also one of the largest manufacturers of precision cast airfoils
through its subsidiary PCC Airfoils, Inc. ("Airfoils Division").
The Airfoils Division manufactures and sells blades and vanes
used as replacement parts and as original equipment in commercial
and military aircraft jet engines. Castings are also sold for
use in industrial gas turbine, automotive, medical and other
commercial applications.
The investment casting, or "lost wax" process, uses ceramic
molds to manufacture parts with complex shapes, closer tolerances
and finer surface finishes in producing metal parts as compared
to parts manufactured using other methods of casting. A wax or
plastic replica of the part, called the "pattern," is surrounded
by a ceramic material called the "investment" to create a mold.
When the mold is heated, the wax or plastic melts and runs out of
the mold. Molten metal is poured into the resulting cavity. When
the metal cools, the ceramic shell is removed and discarded.
After finishing operations and quality verification, the part is
ready for shipment. In certain airfoil and structural castings,
the wax pattern is formed around a core made of ceramic or other
material, which is later removed, to form complex hollow passages
in the finished casting for air cooling or for other purposes
such as transporting fluids.
In fiscal 1995, the Company acquired PCC Specialty Products,
Inc. ("Specialty Products Division" or "SPD"). On February 21,
1996, SPD acquired 100% of the stock of the Carmet Company
("Carmet"), a manufacturer of tungsten carbide cutting tools and
wear parts.
SPD is a diversified manufacturer of products and machines for
general industrial markets. The business has operations that
machine high grade steel into tools primarily used in the
fastener industry. In addition, these operations manufacture
machines on which the tools are used. The business also has two
powdered metal operations which manufacture helical gears and
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tungsten carbide cutting tools and wear parts. In addition, SPD
makes permanent self-lubricating bearings, which are used in
hostile operating environments. Subsequent to fiscal year-end,
SPD acquired 100% of the stock of The Olofsson Corporation, a
manufacturer of machine systems used for boring and turning
processes primarily in the automotive industry.
The Company, through its subsidiary Advanced Forming
Technology, Inc. ("AFT"), is a leading producer of metal
injection molded ("MIM") parts. The MIM process is particularly
suited to high volume production of small complicated metal parts
for numerous industries. In the MIM process, powdered metal and
nonmetallic binders are mixed, heated and injected into a die.
Once solidified, the "green" or unfinished part is taken from the
die and placed in a staging fixture. The binder is removed
through either a thermal or solvent extraction, and the part is
sintered in a vacuum furnace, which changes the powdered metal
into a solid.
The Company manufactures advanced technology, metal-matrix
composite parts, through its subsidiary, PCC Composites, Inc.
Using aluminum silicon carbide (AlSiC), the business manufactures
parts which are lightweight, have high thermal conductivity, and
offer tightly controlled thermal expansion, properties that are
valuable to electronics and other manufacturing companies. The
business uses a process called Pressure Infiltration Casting
("PIC") to combine metals and ceramics to create Metal-Matrix
Composites. PIC is a multi-step process where the metal is first
melted in a vacuum. Using an inert gas and controlled
pressurization, the metal is then forced into a pre-formed
ceramic material to create a composite. The part is
directionally solidified, extracted from the mold and finished
before shipping to the customer.
Products
Sixty-eight percent of PCC's business activity in fiscal year
1996 was with customers in the aerospace industry. Primary
products for this industry are structural and airfoil investment
castings. The Company's structural investment castings are
stationary components that form portions of the fan, compressor,
combustion and turbine sections of the engine where strength and
structural integrity are critical. Many of the Company's
precision cast airfoils are rotating parts that operate in the
low and high pressure turbine sections of the engine under
extreme temperature and pressure conditions. Most aircraft jet
engines use both the Company's structural and airfoil castings.
The Company manufactures its castings to design specifications
established by its customers.
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Aerospace Structural Castings. The Company's Structurals
Division manufactures large, complex structural castings, as well
as a variety of smaller structural castings. These castings are
sold primarily as original equipment to aircraft jet engine
manufacturers. The Structurals Division manufactures investment
castings in various metal alloys that are specified by customers.
As the design of new aircraft engines has emphasized increased
thrust and reduction of noise and exhaust emissions, engine
operating temperatures and pressures have increased. These
conditions require use of engine parts made of alloys that are
able to withstand these operating conditions and provide an
optimum strength-to-weight ratio. Many of these alloys are
particularly suited to investment casting.
The Company continues to experience strong demand from the
aerospace industry for structural parts made from alloys of
titanium, a metal that is lighter than other materials with
comparable performance characteristics. Although the maximum
operating temperature of titanium is lower than that of many
other alloys used in jet engines, there is increasing use of
titanium in all but the hotter parts of the engine because of the
considerable weight savings. Titanium is an exceptionally
difficult metal to cast; however, the Company has developed the
necessary technology and know-how to cast large, complex
investment castings in titanium alloys. The Company operates a
titanium alloy casting plant in Oregon, and also manufactures
titanium alloy castings at its plant in France.
Virtually every manufacturer of jet engines for commercial
aircraft has developed designs to meet the fuel efficiency,
emissions and noise reduction requirements of newly designed
aircraft. Many of these new generation engines, which are
expected to be built through the next decade and beyond, make
significantly greater use of structural investment castings of
the type manufactured by the Company than did prior engine
designs.
General Electric Company ("GE") has used the Company's large,
complex castings on its jet engines for more than 25 years. As
the Company has been able to cast larger and more complex parts,
GE has made increasing use of the Company's castings in its jet
engines. GE's CF6-80 series of engines, for wide-body aircraft
produced by The Boeing Company's Commercial Airplane Group
("Boeing"), Douglas Aircraft Company, a division of McDonnell-
Douglas Corporation ("McDonnell Douglas") and Airbus Industrie
("Airbus"), use a significant number of the Company's complex
structural castings. GE's GE90 jet engine, designed for use on
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the new Boeing 777 and other next generation aircraft, also uses
a significant number of the Company's complex structural
castings.
The Pratt & Whitney Aircraft operation of United Technologies
Corporation ("P&W") has used the Company's complex structural
castings for more than 20 years on its military engines, and for
more than 15 years on its commercial engines. P&W's newest
engines, the PW2000 series used on the Boeing 757 and McDonnell
Douglas C-17, and the PW4000 series used on the Boeing 747, 767
and 777, the Airbus A300, A310 and A330, and the Douglas MD-11,
make extensive use of castings made by the Company.
Rolls-Royce ("R-R"), which manufactures the RB211-524 for the
Boeing 747 and 767 and the RB211-535 for the Boeing 757, has not
included large castings in its engines in the past. R-R's new
Trent series of engines, for use on the Airbus A330 and the
Boeing 777, uses large castings produced by the Company.
CFM International ("CFMI"), a joint venture of GE and SNECMA
of France, has developed the CFM56 series of engines for the
Boeing 737, E-3 and E-6, the Airbus A319, A320, A321 and A340,
and retrofits of the Boeing KC-135 and Douglas DC-8. A number of
the Company's structural castings are used in these engines.
The Company's structural castings are included in military jet
engines that currently power the F-14, F-15, F-16 and F-18
aircraft, as well as the next generation of military aircraft,
including engines for the F-22 Superstar (Advanced Tactical
Fighter) and the C-17 transport for the US Air Force. Cutbacks
in military spending have reduced the Company's sales to United
States government end-users from 29 percent of sales in 1992 to
18 percent in 1996.
Castings made by the Company are also included in jet engines
currently used on or under development for a number of foreign
military aircraft, private passenger aircraft and commercial and
military helicopters.
The Company has one plant in France, which produces structural
investment castings from alloys of stainless steel, nickel,
cobalt-chromium and titanium. The Company believes that the
French plant is the only facility in Western Europe with the
means to cast these different alloys in the same plant.
Aerospace Airfoil Castings. The Company's Airfoils Division
manufactures precision cast airfoils including the stationary
vanes and rotating blades used in the turbine section of the
aircraft jet engines. This engine section is considered the
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"hot" section, where temperatures may exceed 2,000 degrees F.
These conditions require use of superalloys and special casting
techniques to manufacture airfoil castings with internal cooling
passageways that provide both high performance and longer engine
life. The airfoil castings are made in accordance with customer
specifications and designs.
The Airfoils Division uses various casting technologies to
produce its turbine airfoils. Conventional casting processes are
employed to produce equiaxed airfoil castings, in which the metal
grains are oriented randomly throughout the casting. A more
advanced process enables the Company to produce directionally
solidified ("DS") airfoil castings, in which the metal grains are
aligned longitudinally. This alignment decreases the internal
stress on the weakest portion of a metal part where the various
grains adjoin, thereby providing increased strength and improved
efficiencies in engine performance over equiaxed parts. An even
more advanced process enables the Company to produce single
crystal airfoil castings, which consist of one large super alloy
crystal without grain boundaries. Single crystal castings provide
greater strength and performance characteristics than either
equiaxed or DS castings, as well as longer engine life. These
airfoils are used both in new and redesigned engines,
particularly in jet engines used in military applications where
performance requirements are highest and blade life is shorter
than in commercial engines.
The Company's airfoils are qualified for use in most
commercial aircraft jet engines, including CFMI's CFM56 series,
P&W's PW4000, PW2000 and JT9D, as well as GE's CF6 series and the
GE90 engine. The Company also manufactures airfoils for many
military jet engines, including the F100, F101, F110, F117, F119,
F404 and F414.
Non-Aerospace Investment Casting Products. The Company's
strategy for continuing profitable growth has included pursuing
new opportunities for the Company's existing technologies. The
Company believes that significant growth opportunity exists in
the Industrial Gas Turbine ("IGT") market. IGT engines, which
are used for power generation, are built with investment castings
that are similar, yet larger, than blades and vanes manufactured
by the Company's Airfoils Division for the aerospace market. The
Company believes its expertise in casting structural and airfoil
components enables it to compete effectively in this market. The
Company has also been expanding its application of the investment
casting technology in other non-aerospace markets such as
automotive, medical prostheses, sporting goods and industrial
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applications. In fiscal 1996, the growth in investment castings
for non-aerospace applications increased nearly 13 percent from
the prior year.
SPD Products. Under the brand name "Reed-Rico," the Company
designs, manufactures and distributes heading tools, threading
tools, threading machines and attachments. Manufacturers use
these products to form a variety of fasteners and threaded parts.
Customers are mainly industrial companies who serve the
automotive, appliance, construction, farm equipment and aerospace
industries.
Gundrilling tools and machines are distributed under the
"Eldorado" name. The gundrilling process is used to drill high
quality holes to very close tolerances. This process is widely
used in products such as turbine engines, engine blocks, cylinder
heads, transmission shafts, connecting rods and medical
prostheses.
The Carmet operation manufactures tungsten carbide tools, cold-
forming tools and wear parts for a diversified base of industrial
and consumer applications. Because of its high resistance to
wear, tungsten carbide is used in a wide variety of machine tools
for cutting and forming ferrous and non-ferrous metals and is
also used in wood-cutting applications.
SPD also manufactures and distributes specialty powdered-metal
gears and other components for the automotive, appliance, power
tool and power transmission industries. Under the brand name
"Lubrite," the Company designs, manufactures and distributes
bearings. These bearings, which are custom-engineered and
permanently self-lubricating, are used to help maintain
structural integrity in hostile operating environments such as
offshore drilling rigs, large commercial buildings, bridges and
rapid-transit vehicles.
AFT Products. Metal injection molding is a technology that
enables the production of small, complex, net shape metal parts
at a significant cost savings over machining, investment casting
or other net shape and near net shape processes. It is a hybrid
manufacturing process which combines elements from various other
fabrication methods, including powder-metal processing,
investment casting and plastic-injection molding. MIM provides a
technological advantage over other fabrication methods in its
ability to produce small complex parts with thin wall sections,
sharp corners, edges and other interior details that cannot be
produced economically by other processes. AFT's MIM parts have
been used in electronic, medical, firearms, military ordnance,
automotive, fiber optic, aerospace and other industrial products.
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Composite Products. PCC Composites' pressure infiltration
casting process produces lightweight, net shape metal-matrix
composite parts with high thermal conductivity and tightly
controlled thermal expansion. These attributes, which
significantly increase heat dissipation, are important for
applications such as electronics. Extremely intricate shapes can
be produced with this manufacturing process, thereby broadening
its application to a number of general industrial uses.
Sales and Distribution
During the fiscal year ended March 31, 1996, the Company
served approximately 1,000 customers. A year ago, the Company
did business with approximately 350 customers. The increase in
the number of customers resulted primarily from the inclusion of
a full year of operations from SPD in fiscal 1996. The Company's
major customers continue to be a relatively few number of U.S.
and European jet engine manufacturers. Most major aerospace
customers purchase both structural and airfoil castings. Two
customers, GE and P&W, accounted for approximately 38 percent of
net sales during the Company's 1996 and 1995 fiscal years. In
addition, sales to certain other customers include parts which
ultimately are included in GE and P&W engines. Including these
other sales, GE and P&W account for approximately 58 percent of
net sales in 1996 and 67 percent in 1995. No other customer
accounted for more than 10 percent of net sales.
The table below sets forth the relative contribution to sales
of components for the aerospace industry over the past three
years. Data for 1994 have been restated to conform to the 1995
and 1996 classifications.
Fiscal Year
________________
Sales 1994 1995 1996
____ ____ ____
Aerospace 84% 79% 68%
Other 16% 21% 32%
The relative importance of aerospace-related business
(particularly aircraft) subjects the Company's business to the
underlying trends within the aerospace industry. Historically,
both commercial and military aircraft sales have shown cyclical
patterns.
While the Company's large, complex structural castings are
generally designed as permanent engine parts and sold as original
equipment to the engine manufacturers, the airfoil components in
the engine have shorter useful lives and are replaced
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periodically in the course of engine maintenance. As a result,
sales of the Airfoils Division are affected to a lesser degree by
the cyclical patterns of aircraft sales than are sales of the
Structurals Division. Based upon estimates provided by its major
customers, the Company believes that approximately 50 percent of
its sales of airfoils are used as replacement parts.
Fiscal 1996 reflected the first indications of a general
recovery in the aerospace industry, which had been experiencing a
cyclical downturn since calendar 1991. In fiscal 1996, the
Company's sales of investment castings for aerospace and aircraft
gas turbine engines increased $33 million (10%) from 1995,
reflecting the high demand for new aircraft components and
spares. In addition, sales of other industrial and commercial
products increased $87.5 million (94%) in 1996. This increase in
non-aerospace sales reflected both the addition of SPD, which was
acquired at the end of fiscal 1995, and the Company's continued
diversification into non-aerospace markets. See "Management's
Discussion and Analysis" in Exhibit 13, the "Financial Section of
the 1996 Annual Report to Shareholders of Precision Castparts
Corp."
The portion of the Company's net sales for United States
government end-use was 18 percent in 1996, 19 percent in 1995 and
21 percent in 1994. Annual sales to customers outside of the
United States, most of which are in western Europe, were $156.2
million in 1996, $126.8 million in 1995 and $107.2 million in
1994, accounting for 28 percent, 29 percent and 26 percent of the
Company's sales in those years.
The Company's sales of investment castings are made through
sales personnel located in each business operation and through
field sales representatives located at U.S. and international
locations near the Company's major customers. Due to the
sophisticated nature of the product, the Company's sales effort
requires that both field sales representatives and other
technical personnel work closely with customers to identify and
assist in the development of new castings and to provide other
services which are necessary in obtaining new and repeat
production orders. Company representatives are often on-site at
customer locations to support the Company's sales process.
MIM parts, composites parts, powdered-metal parts, tungsten
carbide parts and industrial tools and machines are sold by both
the Company's sales forces and manufacturers' representatives in
the U.S., Europe and Southeast Asia.
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In fiscal 1992, PCC formed a joint venture with Hitachi
Metals, Ltd. for the manufacture of MIM parts in Japan. PCC owns
a 30 percent interest in this joint venture, which began
operations early in fiscal 1993. To date, this joint venture has
not had material sales or a significant effect on PCC's
consolidated results.
Backlog
The following table sets forth in millions of dollars the
Company's backlog of unfilled orders believed to be firm at the
end of each of its last three fiscal years.
April 3, April 2, March 31,
1994 1995 1996
______ ______ ______
$280.2 $313.2 $539.7
A portion of the increase in the 1996 backlog reflects a
change in customer order placement patterns. Longer lead time
orders are being placed, as approximately $161.6 million of the
Company's 1996 backlog consists of orders scheduled for delivery
more than one year in the future, as compared to $72.7 million in
1995 and $82.0 million in 1994.
The majority of sales to customers are made on individual
purchase orders. Most of the Company's orders are subject to
termination by the customer upon payment of the cost of work in
process plus a related profit factor. Historically, the Company
has not experienced significant order cancellations.
For fiscal 1997, the Company expects a continuation of the
increasing demand from the aerospace industry and further growth
in many of the non-aerospace markets served. The Company
continues to pursue growth through a three-tiered approach of
continuously improving operating efficiencies in its existing
businesses, expanding applications and markets for its current
metal forming technologies and acquiring companies which are
synergistic with its existing businesses and core competencies.
See "Management's Discussion and Analysis" in Exhibit 13, the
"Financial Section of the 1996 Annual Report to Shareholders of
Precision Castparts Corp."
Competition
The Company is subject to competition in all of the markets it
serves. Parts similar to those made by the Company can be made
by competitors using either the same types of manufacturing
processes or other forms of manufacturing. While the Company
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believes its manufacturing processes, technology and experience
provide advantages to customers, such as high quality,
competitive prices and physical properties which often meet more
stringent demands, alternative forms of manufacturing can be used
to produce many of the parts made by the Company.
Despite intense competition, the Company believes it is the
number one or two supplier in its principal markets served.
Several factors, including many long-standing customer
relationships, technical expertise, state-of-the-art facilities
and dedicated employees, aid the Company in maintaining its
competitive advantages.
Research and Development
The Company maintains separate research and development
departments for its Airfoils Division and its Structurals
Division, where the majority of research occurs. The research
and development effort at these locations is directed at
developing new manufacturing processes and improving current
processes. Total research and development expenditures amounted
to $3.5 million in 1996, $3.1 million in 1995 and $5.2 million in
1994. A substantial amount of the Company's technological
capability is the result of engineering work performed in
connection with process development and production of new parts.
This engineering work which is charged to the cost of production,
is not included in research and development expenditures.
Employees
At March 31, 1996, the Company employed 5,646 people,
including 2,109 people at the Structurals Division, 2,075 people
at the Airfoils Division, 1,040 people at SPD, 249 people at PCC-
France, 122 people at AFT, 35 people at PCC Composites and 16
people in corporate functions.
Approximately 550 of the employees at the Airfoils Minerva
Plant are covered by a collective bargaining agreement with the
Metal Workers Alliance, which expires in June of 1997. All
employees of PCC-France are covered by a collective bargaining
agreement. Certain of the employees at the SPD Merriman plant are
covered by collective bargaining agreements. An agreement with
the International Association of Machinists ("IAM") covering
approximately 130 employees, expires June 30, 1998, and an
agreement with the Allied Workers International Union covering
fewer than 10 employees expires July 31, 1998. Approximately 30
of the employees at the SPD Carmet plant at Bad Axe are covered
by a collective bargaining agreement with the United Steelworkers
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of America which expires in November of 1996. None of the
Company's other employees are covered by a collective bargaining
agreement. On May 24, 1995, a petition was filed by the United
Steelworkers of America seeking to represent production and
maintenance employees at the Structurals Division. An election
was conducted by the National Labor Relations Board ("NLRB") on
July 27 - 28, 1995, and Steelworkers' representation was voted
down. The Steelworkers filed objections to the election results.
An NLRB hearing officer recommended a rerun election. While that
recommendation was pending review by the NLRB, the Steelworkers
filed a new petition on June 6, 1996, and withdrew the 1995
petition. The NLRB approved that withdrawal. A hearing is now
scheduled to begin July 9, 1996, to resolve bargaining unit
definition issues that must be determined before an election is
scheduled. Management does not have sufficient information to
determine the probable outcome of the unionizing activities, nor
the effect on operations, if any, in the event that the
Structurals Division employees were to be represented by the
union.
Patents and Trade Secrets
Prior to 1988, the Company had not applied for patents
covering its structural casting processes in the belief that
the processes are more securely protected by retaining the
information as trade secrets and avoiding the technical
disclosures required in patent applications. For similar
reasons, AFT has not applied for patents covering its MIM
process. The Company's trade secrets consist principally of
technology developed over years of experience in the manufacture
of complex structural investment castings and MIM parts. Since
1988, the Company has applied for or been issued a number of
patents relating to new technology and processes developed at the
Structurals and Airfoils Divisions.
In connection with its acquisitions of the Airfoils Division,
PCC Composites and SPD, the Company acquired a number of U.S. and
foreign patents. The Company also acquired certain rights and
obligations under license agreements. The Company receives no
significant royalty income from patents.
Materials and Supplies
The primary materials used by the Company are metal alloys,
tool grade steel, powdered metals, waxes, ceramics, X-ray film
and miscellaneous foundry and manufacturing supplies. These
materials have generally been available in adequate quantities to
fill production needs, although prices for some items, primarily
metals, have fluctuated significantly in the past.
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In addition to purchases of materials from outside suppliers,
the Company manufactures some of its own wax blends, and most of
its ceramic blends and metal alloys. Many of the processes used
in manufacturing these materials were developed by the Company
through its own research.
The Company's Structurals and Airfoils Divisions are each
highly integrated, including all facets of the production of
precision structural and airfoil investment castings. The
Company vacuum-melts metals and other elements to create more
than 50 varieties of nickel- and cobalt-based alloy blends.
These superalloys are designed to endure extreme temperature and
stress conditions and are subjected to high purity standards.
The Company also blends the ceramic materials that are used in
forming shell molds and ceramic cores. The Company operates one
plant specializing in production of ceramic materials from basic
minerals such as zircon and fused silica. Another plant
manufactures the preformed ceramic cores that the Company uses in
its turbine airfoil castings to produce complex internal cavities
and air-cooling passages that extend the life of airfoils and
improve engine performance. Currently, approximately half of the
preformed ceramic cores used by the Airfoils Division are
produced by the Company. The Structurals Division produces the
majority of its wax formulations, whereas the Airfoils Division
purchases most of its wax products from suppliers.
Commercial deposits of certain metals, such as cobalt, nickel,
chromium, columbium and molybdenum, which are required for the
alloys used in the Company's castings, are found in only a few
parts of the world. The availability and prices of these metals
are influenced by private or governmental cartels, changes in
world politics, unstable governments in exporting nations and
inflation. Similarly, supplies of tool grade steel used by SPD
are also subject to variation in availability and pricing. These
changes in the supply and cost of metals generally affect all
companies using these materials, including the Company and its
competitors.
Government Regulations
Certain of the Company's products are manufactured and sold
under U.S. government contracts or subcontracts. As are all
companies that provide products or services to the Federal
government, the Company is directly and indirectly subject to
various Federal rules, regulations and orders applicable to
government contractors. Certain of these government regulations
relate specifically to the vendor-vendee relationship with the
government, such as the bidding and pricing rules. Under
Page 12
</Page>
<PAGE>
regulations of this type, the Company must observe certain
pricing restrictions, produce and maintain detailed accounting
data and meet various other requirements. The Company is also
subject to a number of regulations affecting the conduct of its
business generally. For example, the Company must adhere to
standards established by the Office of Federal Contract
Compliance Programs and the Occupational Safety and Health Act
relating to labor practices and occupational safety standards.
Violation of applicable government rules and regulations could
result in civil liability, in cancellation or suspension of
existing contracts or in ineligibility for future contracts or
subcontracts funded in whole or in part with Federal funds.
Environmental Compliance
The Company generates, as do all investment casting
manufacturers, certain waste materials which must be disposed of,
including certain materials for which disposal requires
compliance with environmental protection laws and regulations.
The Company conducts its operations at industrial sites where
hazardous materials have been managed for many years, including
periods before careful management of these materials was required
or generally believed to be necessary. Consequently, the Company
is subject to various environmental laws that impose compliance
obligations and can create liability for historical releases of
hazardous substances.
During the period 1970-1973, the Company contracted for
disposal of certain industrial waste at the Pasco Landfill
located near Pasco, Washington. This landfill has been
designated as a Superfund Site under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended. The Washington State Department of Ecology
("Ecology")notified the Company that it has determined that the
Company is a Potentially Liable Party ("PLP") for the Pasco
Landfill Superfund Site. The Company joined with approximately
40 other PLPs that sent industrial wastes to the site, as well as
with the owners, operators and other PLPs, to fund the initial
Remedial Investigation and Feasibility Study, which was completed
and accepted by Ecology in March 1994. In April, 1995, the PLPs
and Ecology agreed on a Phase II Remedial Investigation/
Feasibility Study Work Plan to study potential remediation
alternatives.
In 1989, the Oregon Health Division ("Health Division")
alleged that the Company discharged low level radioactive
material to the Portland city sewer in violation of the Company's
radioactive materials license. The City of Portland also has
Page 13
</Page>
<PAGE>
alleged that the discharges violated the Company's discharge
permit. Although the Company contested the alleged violations,
it undertook extensive cleaning of portions of the sewer system
under a consent agreement with the City and the Health Division.
In 1994, the Health Division revived the alleged violation,
asserting that the issue was not fully resolved by the cleaning.
The Health Division has requested additional investigation and
further sewer cleaning. The Company continues to contest the
alleged violation but is conducting an investigation of its on-
site sewer lines to determine whether additional cleaning is
necessary to prevent further discharge of radioactive materials
into the City's sewer.
With the acquisition of SPD, the Company acquired properties
and facilities that had been operated as industrial manufacturing
facilities for many years and had used materials now recognized
as hazardous. Consequently, there are several environmental
remediation efforts in place at SPD facilities. In the
acquisition of SPD, PCC received certain environmental
indemnities from the prior owners. The prior owners of SPD have
agreed to indemnify PCC for environmental damage on acquired
properties up to a maximum of $5.0 million through March 8, 2000.
No claims have been made to date. The Company believes that its
reserves and the indemnities provided by the former owners of SPD
are adequate to protect the Company from any adverse economic
effects of environmental liabilities at SPD facilities.
Forward Looking Statements
Information included within this section describing the
divisions relating to projected growth and future results
and events constitutes forward-looking statements. Actual
results in future periods may differ materially from the
forward-looking statements because of a number of risks and
uncertainties, including but not limited to the rate of
recovery in the aerospace cycle; the relative success of the
Company's entry into new markets, including the rapid ramp-
up for industrial gas turbine component production;
competitive pricing; the availability and costs of metals;
relations with the Company's employees; and the Company's
ability to manage its operating costs and integrate acquired
businesses in an effective manner. Any forward-looking
statements should be considered in light of these factors.
Page 14
</Page>
<PAGE>
ITEM 2. PROPERTIES
The Company's manufacturing plants and administrative
offices, along with certain information concerning the
products and facilities at March 31, 1996, are as follows:
<TABLE>
<CAPTION>
Building
Space
Plant and Location Principal Products (sq. ft.)
<S> <C> <C>
STRUCTURALS DIVISION AND CORPORATE
Large Structurals
Business Operation Large castings 373,000*
Portland, Oregon
Titanium Business Operation Titanium castings 277,000*
Milwaukie, Oregon
Small Structurals Small and 204,000
Business Operation medium-sized
Clackamas, Oregon castings
Division Distribution Center Shipping and 47,000**
Clackamas, Oregon warehousing
Administrative Center Research and 52,000
Clackamas, Oregon development, division
administration and
corporate staff
AIRFOILS DIVISION
Minerva Plant Equiaxed, single 288,000
Minerva, Ohio crystal and DS
airfoils castings
Crooksville Plant Airfoils finishing 44,000
Crooksville, Ohio for Minerva Plant
SMP Plant Single crystal and 119,000
Wickliffe, Ohio DS airfoil castings
Douglas Plant Equiaxed airfoil 135,000
Douglas, Georgia castings
Mentor Plant Equiaxed, single 65,000**
Mentor, Ohio crystal and DS
airfoil castings
Page 15
</Page>
<PAGE>
SRI Plant Preformed ceramic 73,000
Cleveland, Ohio cores
Sanford Plant Ceramic materials 66,000
Sanford, North Carolina and core finishing
for SRI Plant
Prototype Foundry Research and 15,000
Minerva, Ohio development;
experimental
production
Administrative Offices Administration 13,000**
Beachwood, Ohio
SPECIALTY PRODUCTS DIVISION
Reed-Rico Holden Plant Threading tools and 144,000
Holden, Massachusetts machines
Reed-Rico Bristol Plant Heading tools 46,000
Bristol, Rhode Island
Reed-Rico Gaffney Plant Heading tools 10,000
Gaffney, South Carolina
Eldorado Plant Gundrilling tools 60,000
Milford, Connecticut and machines
Merriman Plant Powdered metal parts 193,000
Hingham, Massachusetts and self-lubricating
structural bearings
Carmet Duncan Plant Tungsten carbide 140,000
Duncan, South Carolina cutting tools and
wear parts
Carmet Bad Axe Plant Tungsten carbide 40,000
Bad Axe, Michigan powder
Carmet Gainesville Plant Grinding and 30,000**
Gainesville, Georgia finishing work for
Duncan Plant
PCC - FRANCE
PCC-France Plant Medium and large 66,000
Ogeu, France sized castings,
Titanium castings
Page 16
</Page>
<PAGE>
ADVANCED FORMING TECHNOLOGY
AFT Plant Powdered metal 40,000**
Longmont, Colorado injection molded
parts
PCC - COMPOSITES
PCC - Composites Plant Metal matrix 21,000**
Pittsburgh, Pennsylvania composite parts
* 76,000 sq. ft. of the Large Structurals Business Operation
plant and 55,000 sq. ft. of the Titanium Business Operation
plant are leased.
** Entire facility is leased.
The majority of the Company's facilities are owned. The
Mentor plant is leased with an option to purchase; the current
lease term expires in 2000. The Gainesville plant lease expires
in 2001, the AFT plant lease expires in 1997 and the PCC
Composites plant lease expires in 2001.
The Company plans to expand its manufacturing capacity to meet
anticipated market demand for its products. See "Management's
Discussion and Analysis," in Exhibit 13, the "Financial Section
of the 1996 Annual Report to Shareholders of Precision Castparts
Corp."
ITEM 3. LEGAL PROCEEDINGS
For a description of claims relating to environmental matters,
see "Item 1. Business -- Environmental Compliance."
For a description of claims relating to employee matters, see
"Item 1, Business -- Employees."
Various lawsuits arising during the normal course of business
are pending against the Company. In the opinion of management,
the outcome of these lawsuits will have no significant effect on
PCC's consolidated financial position.
Page 17
</Page>
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers of the Registrant (a)
</TABLE>
<TABLE>
<CAPTION>
Officer Position Held
Name Since Age With the Registrant
<C> <C> <C> <C>
William C. McCormick (b) 1985 62 Chairman, President
and Chief Executive
Officer
Peter G. Waite (c) 1980 52 Executive Vice
President-
Airfoils Division
Mark Donegan (d) 1992 39 Executive Vice
President-
Structurals
Division
William D. Larsson (e) 1980 51 Vice President and
Chief Financial
Officer
Roy M. Marvin (f) 1967 65 Vice President-
Administration and
Secretary
<FN>
__________
(a) The officers serve for a term of one year and until their
successors are elected.
(b) Elected Chairman in 1994, President and Chief Executive
Officer in 1991 and Director in 1986. Served as President
and Chief Operating Officer from 1985-1991.
(c) Elected Executive Vice President -- Airfoils Division in
1986.
(d) Elected Executive Vice President -- Structurals Division in
1992.
(e) Elected Vice President -- Finance in 1980. Named Vice
President and Chief Financial Officer in 1993.
(f) Retired May 31, 1996. Elected Secretary in 1983, Vice
President -- Administration in 1980, and Director in 1967.
Served as Treasurer from 1967 - 1993.
</TABLE>
Page 18
</Page>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
As of June 7, 1996 there were approximately 2,327 shareholders
of record of the Company's common stock. The Company's common
stock is listed on the New York Stock Exchange under the symbol
PCP. It is also traded on the Midwest Stock Exchange, the
Pacific Stock Exchange and the Philadelphia Stock Exchange.
Additional information with respect to Market for the
Registrant's Common Stock and Related Stockholder Matters,
including dividends, is incorporated herein by reference to the
Five-Year Summary of Selected Financial Data and the Quarterly
Financial Information in Exhibit 13, the "Financial Section of
the 1996 Annual Report to Shareholders of Precision Castparts
Corp." The Company expects to continue to pay quarterly cash
dividends, subject to its earnings, financial condition and other
factors.
ITEM 6. SELECTED FINANCIAL DATA
Information with respect to Selected Financial Data is
incorporated herein by reference to the "Five-Year Summary of
Selected Financial Data" in Exhibit 13, the "Financial Section of
the 1996 Annual Report to Shareholders of Precision Castparts
Corp."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information with respect to Management's Discussion and
Analysis of Financial Condition and Results of Operations is
incorporated herein by reference to "Management's Discussion and
Analysis" in Exhibit 13, the "Financial Section of the 1996
Annual Report to Shareholders of Precision Castparts Corp."
Information included in "Management's Discussion & Analysis"
in Exhibit 13, the "Financial Section of the 1996 Annual Report
to Shareholders of Precision Castparts Corp." describing the
divisions relating to projected growth and future results and
events constitutes forward-looking statements. Actual results in
future periods may differ materially from the forward-looking
statements because of a number of risks and uncertainties,
including but not limited to the rate of recovery in the
aerospace cycle; the relative success of the Company's entry into
Page 19
</Page>
<PAGE>
new markets, including the rapid ramp-up for industrial gas
turbine component production; competitive pricing; the
availability and costs of metals; relations with the Company's
employees; and the Company's ability to manage its operating
costs and integrate acquired businesses in an effective manner.
Any forward-looking statements should be considered in light of
these factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to Financial Statements and
Supplementary Data is incorporated herein by reference to pages
35 through 67 of Exhibit 13, the "Financial Section of the 1996
Annual Report to Shareholders of Precision Castparts Corp."
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors of the Company is
incorporated herein by reference to "Proposal 1: Election of
Directors" continuing through "Report of the Compensation
Committee on Executive Compensation" in the Company's Proxy
Statement dated June 28, 1996 for the 1996 Annual Meeting of
Shareholders of the Registrant. The information required by this
item with respect to the Company's executive officers follows
Part I, Item 4 of this document.
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to Executive Compensation is
incorporated herein by reference to "Compensation of Executive
Officers" in the Proxy Statement dated June 28, 1996 for the 1996
Annual Meeting of Shareholders of the Registrant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to Security Ownership of Certain
Beneficial Owners and Management is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners"
and "Security Ownership of Directors and Executive Officers" in
the Proxy Statement dated June 28, 1996 for the 1996 Annual
Meeting of Shareholders of the Registrant.
Page 20
</Page>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to Certain Relationships and Related
Transactions is incorporated herein by reference to "Board
Compensation, Attendance and Committees, Certain Transactions" in
the Proxy Statement dated June 28, 1996, for the 1996 Annual
Meeting of Shareholders of the Registrant.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a)(1) Financial Statements
The following financial statements incorporated by
reference from Exhibit 13, the "Financial Section of the
1996 Annual Report to Shareholders of Precision
Castparts Corp.," are filed as part of this report.
<TABLE>
<CAPTION>
Page in Exhibit 13,
the "Financial Section
of the 1996 Annual Report
to Shareholders
Statement of Precision Castparts Corp."
<S> <C>
Consolidated Statements of Income 35-36
Consolidated Balance Sheets 37-38
Consolidated Statements of Cash Flows 39-41
Consolidated Statements of Shareholders'
Investment 42-43
Notes to Financial Statements 44-63
Report of Independent Accountants 63
</TABLE>
(a)(2) Financial Statement Schedule
The following schedule is filed as part of this report:
Schedule II -- Valuation and Qualifying Accounts
Report of Independent Accountants on Financial Statement
Schedule
(b) A current report on Form 8-K was filed June 14, 1996,
reporting under Item 2 thereof the acquisition of the
Olofsson Corporation.
Page 21
</Page>
<PAGE>
(a)(3) Exhibits
<TABLE>
<S> <C> <C>
(3)A -- Restated Articles of Incorporation
of
Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
(3)A in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
(3)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)A -- Precision Castparts Corp.
Revised and Restated Stock Incentive Plan as
amended. (Incorporated herein by reference to
Exhibit (10)A in the Form 10-K dated April 3,
1994.) (File number 1-10348)
(10)B -- Precision Castparts Corp. Non-
Employee Directors' Stock Option Plan.
(Incorporated herein by reference to Exhibit
(10)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)C -- Precision Castparts Corp. 1994
Stock Incentive Plan. (Incorporated herein
by reference to Appendix A in Registrant's
June 20, 1994 Proxy Statement to
Shareholders.) (File number 1-10348)
(10)D -- Precision Castparts Corp.
Nonemployee Directors' Deferred Compensation
Plan dated January 1, 1995. (Incorporated
herein by reference to Exhibit (10)D in the
Form 10-K dated April 2, 1995.) (File number
1-10348)
(10)E -- Precision Castparts Corp.
Executive Deferred Compensation Plan dated
January 1, 1995 (Incorporated herein by
reference to Exhibit (10)E in the Form 10-K
dated April 2, 1995.) (File number 1-10348)
Page 22
</Page>
<PAGE>
(10)F -- Credit Agreement Dated as of
February 29, 1996 among Precision Castparts
Corp.; Bank of America National Trust and
Savings Association, as Agent; The Bank of
Nova Scotia and Wachovia Bank of Georgia,
N.A., as Co-Agents; and The Other Financial
Institutions Party Hereto (File number
1-10348)
(10)G -- Precision Castparts Corp.
Corporate Executive Bonus Program, FY96 (File
number 1-10348)
(11) -- Statement re Calculation of
Earnings Per Share for the Year Ended March
31, 1996.
(13) -- Financial Section of the 1996
Annual Report to Shareholders of Precision
Castparts Corp. for the year ended March 31,
1996.
(21) -- Subsidiaries of Precision Castparts
Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule
(b)
(c) See (a) (3) above.
(d) See (a) (2) above.
Page 23
</Page>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PRECISION CASTPARTS CORP.
By /s/ WILLIAM C. MCCORMICK
_____________________________
William C. McCormick
Chairman of the Board,
Director, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities and on the dates
indicated.
</TABLE>
<TABLE>
<CAPTION>
Signature Title
____________________________________________________________
<S> <C>
As officers or directors of
PRECISION CASTPARTS CORP.
/s/ WILLIAM C. MCCORMICK Chairman of the Board,
___________________________ Director, President and Chief
William C. McCormick Executive Officer
/s/ WILLIAM D. LARSSON Vice President and Chief
___________________________ Financial Officer
William D. Larsson (Principal Financial and
Accounting Officer)
/s/ ROY M. MARVIN Director and Vice President-
___________________________ Administration and Secretary
Roy M. Marvin
/s/ PETER R. BRIDENBAUGH Director
___________________________
Peter R. Bridenbaugh
Page 24
</Page>
<PAGE>
/s/ DEAN T. DUCRAY Director
___________________________
Dean T. DuCray
/s/ DON R. GRABER Director
___________________________
Don R. Graber
/s/ HOWARD W. HILL Director
___________________________
Howard W. Hill
/s/ STEVEN G. ROTHMEIER Director
___________________________
Steven G. Rothmeier
/s/ DWIGHT A. SANGREY Director
___________________________
Dwight A. Sangrey
Page 25
</TABLE>
</Page>
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
PRECISION CASTPARTS CORP. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For the years ended
(000's Omitted)
Column A Column B Column C Column D Column E Column F
________________________________________________________________________________
Additions Uncollectible Additions
Balance at Charged to Accounts due to Balance
Beginning Additions Written Business at End
Classification of Period at Cost Off Acquisitions of Period
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
April 3, 1994
Reserve for Doubtful
Accounts $ 600 $ 200 $ 100 $ -- $ 700
======== ======== ======== ======== ========
April 2, 1995
Reserve for Doubtful
Accounts $ 700 $ 100 $ 100 $ 500 $ 1,200
======== ======== ======== ======== ========
March 31, 1996
Reserve for Doubtful
Accounts $ 1,200 $ -- $ 200 $ 100 $ 1,100
======== ======== ======== ======== ========
</TABLE>
Page 26
</Page>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors of Precision Castparts
Corp.
Our audits of the consolidated financial statements referred
to in our report dated April 25, 1996 appearing on page 27 of the
Financial Section of the 1996 Annual Report to Shareholders of
Precision Castparts Corp. (which report and consolidated
financial statements are included as Exhibit 13 in this Annual
Report on Form 10-K) also included an audit of the Financial
Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In
our opinion, this Financial Statement Schedule presents fairly,
in all material respects, the information set forth therein when
read in conjunction with the related consolidated financial
statements.
/s/ PRICE WATERHOUSE LLP
_________________________
PRICE WATERHOUSE LLP
Portland, Oregon
April 25, 1996
Page 27
</Page>
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
<TABLE>
<S> <C> <C>
(3)A -- Restated Articles of Incorporation of
Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
(3)A in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(3)B -- Bylaws of Precision Castparts Corp.
(Incorporated herein by reference to Exhibit
(3)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)A -- Precision Castparts Corp.
Revised and Restated Stock Incentive Plan as
amended. (Incorporated herein by reference to
Exhibit (10)A in the Form 10-K dated April 3,
1994.) (File number 1-10348)
(10)B -- Precision Castparts Corp. Non-
Employee Directors' Stock Option Plan.
(Incorporated herein by reference to Exhibit
(10)B in the Form 10-K dated April 3, 1994.)
(File number 1-10348)
(10)C -- Precision Castparts Corp. 1994
Stock Incentive Plan. (Incorporated herein by
reference to Appendix A in Registrant's June
20, 1994 Proxy Statement to Shareholders.)
(File number 1-10348)
(10)D -- Precision Castparts Corp.
Nonemployee Directors' Deferred Compensation
Plan dated January 1, 1995. (Incorporated
herein by reference to Exhibit (10)D in the
Form 10-K dated April 2, 1995.) (File number 1-
10348)
(10)E -- Precision Castparts Corp.
Executive Deferred Compensation Plan dated
January 1, 1995 (Incorporated herein by
reference to Exhibit (10)E in the Form 10-K
dated April 2, 1995.) (File number 1-10348)
(10)F -- Credit Agreement Dated as of
February 29, 1996 among Precision Castparts
Corp.; Bank of America National Trust and
Savings
Page 28
</Page>
<PAGE>
Association, as Agent; The Bank of
Nova Scotia and Wachovia Bank of Georgia, N.A.,
as Co-Agents; and The Other Financial
Institutions Party Hereto (File number
1-10348)
(10)G -- Precision Castparts Corp.
Corporate Executive Bonus Program, FY96 (File
number 1-10348)
(11) -- Statement re Calculation of Earnings
Per Share for the Year Ended March 31, 1996.
(13) -- Financial Section of the 1996 Annual
Report to Shareholders of Precision Castparts
Corp. for the year ended March 31, 1996.
(21) -- Subsidiaries of Precision Castparts
Corp.
(23) -- Consent of Independent Accountants.
(27) -- Financial Data Schedule
(b)
(c) See (a) (3) above.
(d) See (a) (2) above.
</TABLE>
EXHIBIT (10)F
4122129.08
<PAGE>
CREDIT AGREEMENT
Dated as of February 29, 1996
among
PRECISION CASTPARTS CORP.;
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent;
THE BANK OF NOVA SCOTIA and
WACHOVIA BANK OF GEORGIA, N.A.,
as Co-Agents;
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
Arranged by
BA SECURITIES, INC.
</Page>
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS 1
1.01 Certain Defined Terms 1
1.02 Other Interpretive Provisions 22
1.03 Accounting Principles 23
ARTICLE II
THE CREDITS 23
2.01 Amounts and Terms of Commitments 23
2.02 Loan Accounts 23
2.03 Procedure for Committed Borrowing 24
2.04 Conversion and Continuation Elections 25
2.05 Bid Borrowings 26
2.06 Procedure for Bid Borrowings 26
2.07 Voluntary Termination or Reduction of Commitments 31
2.08 Optional Prepayments 31
2.09 Repayment 32
2.10 Interest 32
2.11 Fees 33
(a) Arrangement, Agency Fees 33
(b) Commitment Fees 33
2.12 Computation of Fees and Interest 33
2.13 Payments by the Company 34
2.14 Payments by the Banks to the Agent 34
2.15 Sharing of Payments, Etc. 35
2.16 Subsidiary Guaranty 36
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY 36
3.01 Taxes. 36
3.02 Illegality 37
3.03 Increased Costs and Reduction of Return 38
3.04 Funding Losses 38
3.05 Inability to Determine Rates 39
3.06 Reserves on Offshore Rate Committed Loans 39
3.07 Certificates of Banks 40
3.08 Substitution of Banks 40
3.09 Survival 40
i
</Page>
<PAGE>
ARTICLE IV
CONDITIONS PRECEDENT 40
4.01 Conditions of Initial Loans 40
(a) Credit Agreement; Notes; Subsidiary Guaranty 41
(b) Resolutions; Incumbency 41
(c) Organization Documents; Good Standing 41
(d) Legal Opinion 41
(e) Payment of Fees 41
(f) Certificate 42
(g) Other Documents 42
4.02 Conditions to All Borrowings 42
(a) Notice of Borrowing or Conversion/Continuation 42
(b) Continuation of Representations and Warranties 42
(c) No Existing Default 42
ARTICLE V
REPRESENTATIONS AND WARRANTIES 43
5.01 Corporate Existence and Power 43
5.02 Corporate Authorization; No Contravention 43
5.03 Governmental Authorization 44
5.04 Binding Effect 44
5.05 Litigation 44
5.06 No Default 44
5.07 ERISA Compliance 45
5.08 Use of Proceeds; Margin Regulations 45
5.09 Title to Properties 45
5.10 Taxes 46
5.11 Financial Condition 46
5.12 Environmental Matters 46
5.13 Regulated Entities 46
5.14 No Burdensome Restrictions; No Restrictions on
Subsidiary Dividends 47
5.15 Copyrights, Patents, Trademarks and Licenses,
etc. 47
5.16 Subsidiaries 47
5.17 Insurance 47
5.18 Swap Obligations 48
5.19 Full Disclosure 48
ARTICLE VI
AFFIRMATIVE COVENANTS 48
6.01 Financial Statements 48
6.02 Certificates; Other Information 49
6.03 Notices 49
6.04 Preservation of Corporate Existence, Etc 50
6.05 Maintenance of Property 51
6.06 Insurance 51
6.07 Payment of Obligations 51
6.08 Compliance with Laws 51
ii
</Page>
<PAGE>
6.09 Compliance with ERISA 52
6.10 Inspection of Property and Books and Records 52
6.11 Environmental Laws 52
6.12 Use of Proceeds 52
6.13 Internal Controls 52
6.14 New Material Subsidiaries 53
ARTICLE VII
NEGATIVE COVENANTS 53
7.01 Limitation on Liens 53
7.02 Disposition of Assets 55
7.03 Consolidations and Mergers 55
7.04 Loans and Investments 56
7.05 Limitation on Subsidiary Indebtedness 58
7.06 Transactions with Affiliates 58
7.07 Use of Proceeds 58
7.08 Contingent Obligations 59
7.09 Joint Ventures 59
7.10 ERISA 59
7.11 Change in Business 59
7.12 Accounting Changes 60
7.13 Minimum Consolidated Net Worth 60
7.14 Interest Coverage Ratio 60
7.15 Leverage Ratio 60
7.16 No Restrictions on Subsidiary Dividends 60
ARTICLE VIII
EVENTS OF DEFAULT 61
8.01 Event of Default 61
(a) Non-Payment 61
(b) Representation or Warranty 61
(c) Specific Defaults 61
(d) Other Defaults 61
(e) Cross-Default 61
(f) Insolvency; Voluntary Proceedings 62
(g) Involuntary Proceedings 62
(h) ERISA 62
(i) Monetary Judgments 63
(j) Non-Monetary Judgments 63
(k) Change of Control 63
(l) Guarantor Defaults 63
(m) Adverse Change 64
8.02 Remedies 64
8.03 Rights Not Exclusive 64
ARTICLE IX
THE AGENT 64
iii
</Page>
<PAGE>
9.01 Appointment and Authorization; "Agent" 64
9.02 Delegation of Duties 65
9.03 Liability of Agent 65
9.04 Reliance by Agent 66
9.05 Notice of Default 66
9.06 Credit Decision 66
9.07 Indemnification of Agent 67
9.08 Agent in Individual Capacity 68
9.09 Successor Agent 68
9.10 Withholding Tax 68
9.11 Co-Agents. 70
ARTICLE X
MISCELLANEOUS 70
10.01 Amendments and Waivers 70
10.02 Notices 71
10.03 No Waiver; Cumulative Remedies 72
10.04 Costs and Expenses 72
10.05 Company Indemnification 73
10.06 Payments Set Aside 73
10.07 Successors and Assigns 73
10.08 Assignments, Participations, etc. 74
10.09 Confidentiality 76
10.10 Set-off 76
10.11 Automatic Debits of Fees 77
10.12 Notification of Addresses, Lending Offices, Etc. 77
10.13 Counterparts 77
10.14 Severability 77
10.15 No Third Parties Benefited 77
10.16 Governing Law and Jurisdiction 78
10.17 Waiver of Jury Trial 78
10.18 OREGON LEGAL NOTICE 78
10.19 Entire Agreement 78
iv
</Page>
<PAGE> CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of February 29,
1996, among Precision Castparts Corp., an Oregon corporation (the
"Company"), the several financial institutions from time to time
party to this Agreement (collectively, the "Banks"; individually,
a "Bank"), Bank of America National Trust and Savings
Association, as agent for the Banks, and The Bank of Nova Scotia
and Wachovia Bank of Georgia, N.A., as co-agents.
WHEREAS, the Banks have agreed to make available to the
Company a revolving credit facility upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties agree as
follows:
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms. The following terms have the
following meanings:
"Absolute Rate" has the meaning specified in
subsection 2.06(c).
"Absolute Rate Auction" means a solicitation of
Competitive Bids setting forth Absolute Rates pursuant
to Section 2.06.
"Absolute Rate Bid Loan" means a Bid Loan that
bears interest at a rate determined with reference to
the Absolute Rate.
"Acquisition" means any transaction or series of
related transactions for the purpose of or resulting,
directly or indirectly, in (a) the acquisition of all or
substantially all of the assets of a Person, or of any
business or division of a Person, (b) the acquisition of in
excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger
or consolidation or any other combination with another
Person (other than a Person that is a Subsidiary) provided
that the Company or the Subsidiary is the surviving entity.
"Affected Bank" means the meaning specified in
Section 3.08.
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<PAGE>
"Affiliate" means, as to any Person, any other Person
which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person.
A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management and
policies of the other Person, whether through the ownership
of voting securities or membership interests, by contract,
or otherwise.
"Agent" means BofA in its capacity as agent for the
Banks hereunder, and any successor agent appointed or
arising under Section 9.09.
"Agent-Related Persons" means BofA and any successor
agent appointed or arising under Section 9.09, together with
their respective Affiliates (including, in the case of BofA,
the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
"Agent's Payment Office" means the address for payments
set forth on Schedule 10.02 or such other address as the
Agent may from time to time specify.
"Agreement" means this Credit Agreement.
"Applicable Margin" means, in respect of all Committed
Loans outstanding on any date (A) for the period from the
Closing Date through March 31, 1996, 0.350% for Offshore
Rate Committed Loans and 0.000% for Base Rate Committed
Loans, and (B) from April 1, 1996, the percentage specified
below opposite the Leverage Ratio (which ratio shall be
calculated for the relevant four fiscal quarter period)
calculated for the periods described below.
<TABLE>
<CAPTION>
Leverage Ratio
at End of Fiscal Quarter Applicable Margin
________________________ _________________
<S> <C> <C>
Offshore Base
Rate Rate
____ ____
Less than 1.35 to 1.00 0.350% 0.000%
Less than 1.85 to 1.00 but
greater than or equal
to 1.35 to 1.00 0.400% 0.000%
Less than 2.35 to 1.00 but
greater than or equal to
1.85 to 1.00 0.450% 0.000%
Page 2
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<PAGE>
Less than 2.85 to 1.00 but
greater than or equal to
2.35 to 1.00 0.500% 0.000%
Greater than or equal to 2.85
to 1.00 0.750% 0.000%
</TABLE>
The Applicable Margin for each fiscal quarter
commencing on and after April 1, 1996 will be determined by
the Agent from time to time for each quarter of each
calendar year (the "Current Quarter") in accordance with the
table set forth above based on the Compliance Certificate
delivered by the Company for the immediately preceding
calendar quarter (the "Preceding Quarter") under subsection
6.02(b). Such determination will be based on the
calculation of the Leverage Ratio set forth in the
Compliance Certificate for the Preceding Quarter and shall
apply from and including the first day of the Current
Quarter until and including the last day of the Current
Quarter. Prior to the date in the Current Quarter on which
the Agent receives the Compliance Certificate for the
Preceding Quarter which is required to be delivered during
the Current Quarter, the Applicable Margin shall be the same
as was applicable in the Preceding Quarter, subject to any
necessary adjustment pursuant to this paragraph upon receipt
of such subsequent Compliance Certificate, effective as of
the beginning of the Current Quarter; provided, that the
Applicable Margin for any day after the fifty-fifth day of
any calendar quarter in which the Company shall not deliver
a Compliance Certificate shall equal the next higher
Applicable Margin as set forth in the table above
immediately below the previously effective Applicable
Margin; thus if the Applicable Margin had previously been
0.4000% for Offshore Rate Committed Loans, and 0.0000% for
Base Rate Committed Loans, a failure to deliver the
Compliance Certificate by the fifty-fifth day of the Current
Quarter would cause the Applicable Margin to be 0.4500% and
0.0000%, respectively, for the duration of that quarter. If
the subsequent Compliance Certificate shall indicate that
the Applicable Margin should have been increased for the
Current Quarter pursuant to this paragraph, then the Company
shall pay on the date of delivery of such Compliance
Certificate, to the Agent for the account of the Banks, an
amount equal to the positive difference, if any, between (i)
the aggregate amount of interest which would theretofore
have been payable during such Current Quarter had such
increase been made on the first day of such Current Quarter
and (ii) the amount of interest which the Company actually
paid during such Current Quarter. If such Compliance
Certificate shall indicate that the Company paid more
interest than would have been required if any reduction
Page 3
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<PAGE>
therein required by this paragraph had commenced on the
first day of such Current Quarter, any such excess payment
shall be credited to future payments of interest and other
amounts payable by the Company hereunder. Any such credit
to future payments of interest shall in each case be made
first to the next occurring payment of interest due
hereunder. The Applicable Margin shall be adjusted
automatically as to all Committed Loans then outstanding
(without regard to the timing of Interest Periods) as of the
effective date of any change in the Applicable Margin.
"Approved Acquisition" means any Acquisition:
(i) which, if such Acquisition is to be
financed with any Loan proceeds, is not contested at
any time by the board of directors or equivalent
governing body of the acquired Person or the Person
from whom the Acquisition is to be made unless all of
the Banks have approved such Acquisition in writing;
(ii) which is undertaken in accordance with
all applicable Requirements of Law;
(iii) unless otherwise consented to in
writing by the Majority Banks, with respect to which
the acquired Person is engaged in an Existing Line of
Business or a line of business reasonably related to an
Existing Line of Business, or, in the case of an
Acquisition of assets or a division or business, all or
substantially all of the acquired assets, division or
business are used in the operations of or engaged in
the operation of an Existing Line of Business or a line
of business reasonably related to an Existing Line of
Business;
(iv) after giving effect to which, including
any Indebtedness incurred or assumed by the Company and
its Subsidiaries in connection therewith, the Company
would be in compliance with the provisions of Sections
7.13, 7.14, and 7.15, calculated as if such Acquisition
had occurred on the last day of the immediately
preceding fiscal quarter; and
(v) which, if such Acquisition involves the
payment of consideration, whether in cash or other
property or by assumption of Indebtedness, by the
Company or a Subsidiary of an amount in excess of
$100,000,000 (a "Major Acquisition"), has been approved
in writing by the Majority Banks.
"Arranger" means BA Securities, Inc., a Delaware
corporation.
Page 4
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<PAGE>
"Assignee" has the meaning specified in subsection
10.08(a).
"Attorney Costs" means and includes all fees and
disbursements of any law firm or other external counsel, the
allocated cost of internal legal services and all
disbursements of internal counsel.
"Bank" has the meaning specified in the introductory
clause hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform
Act of 1978 (11 U.S.C. 101, et seq.).
"Base Rate" means, for any day, the higher of: (a)
0.50% per annum above the latest Federal Funds Rate; and (b)
the rate of interest in effect for such day as publicly
announced from time to time by BofA in San Francisco,
California, as its "reference rate." (The "reference rate"
is a rate set by BofA based upon various factors including
BofA's costs and desired return, general economic conditions
and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below
such announced rate.)
Any change in the reference rate announced by BofA
shall take effect at the opening of business on the day
specified in the public announcement of such change.
"Base Rate Committed Loan" means a Committed Loan that
bears interest based on the Base Rate.
"Bid Borrowing" means a Borrowing hereunder
consisting of one or more Bid Loans made to the
Company on the same day by one or more Banks.
"Bid Loan" means a Loan by a Bank to the Company
under Section 2.05, which may be a LIBOR Bid Loan or
an Absolute Rate Bid Loan.
"Bid Loan Note" has the meaning specified in Section
2.02.
"BofA" means Bank of America National Trust and
Savings Association, a national banking association.
"Borrowing" means a borrowing hereunder consisting of
Loans of the same Type made to the Company on the same day
by the Banks under Article II, and may be a Committed
Page 5
</Page>
<PAGE>
Borrowing or a Bid Borrowing and, other than in the case of
Base Rate Committed Loans, having the same Interest Period.
"Borrowing Date" means any date on which a Borrowing
occurs under Section 2.03.
"Business Day" means any day other than a Saturday,
Sunday or other day on which commercial banks in New York
City or San Francisco are authorized or required by law to
close and, if the applicable Business Day relates to any
Offshore Rate Loan, means such a day on which dealings are
carried on in the applicable offshore dollar interbank
market.
"Capital Adequacy Regulation" means any guideline,
request or directive of any central bank or other
Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each
case, regarding capital adequacy of any bank or of any
corporation controlling a bank.
"Closing Date" means the date on which all conditions
precedent set forth in Section 4.01 are satisfied or waived
by all Banks (or, in the case of subsection 4.01(e), waived
by the Person entitled to receive such payment).
"Code" means the Internal Revenue Code of 1986, and
regulations promulgated thereunder.
"Commitment", as to each Bank, has the meaning
specified in Section 2.01.
"Commitment Fee Percentage" means (A) for the period
from the Closing Date through March 31, 1996, 0.12500%, and
(B) from April 1, 1996, the percentage specified below
opposite the Leverage Ratio (which ratio shall be
calculated for the relevant four fiscal quarter period)
calculated for the periods described below.
Leverage Ratio
at End of Fiscal Quarter Commitment Fee
________________________ ______________
Less than 1.35 to 1.00 0.12500%
Less than 1.85 to 1.00 but greater than
or equal to 1.35 to 1.00 0.15000%
Less than 2.35 to 1.00 but greater than
or equal to 1.85 to 1.00 0.18750%
Page 6
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<PAGE>
Less than 2.85 to 1.0 but greater than
or equal to 2.35 to 1.00 0.20000%
Greater than or equal to 2.85 to 1.00 0.25000%
The Commitment Fee Percentage for each fiscal quarter
commencing on and after April 1, 1996, will be determined
by the Agent from time to time for each Current Quarter in
accordance with the table set forth above based on the
Compliance Certificate delivered by the Company for the
Preceding Quarter under subsection 6.02(b). Such
determination will be based on the calculation of the
Leverage Ratio set forth in the Compliance Certificate for
the Preceding Quarter and shall apply from and including
the first day of the Current Quarter until and including
the last day of the Current Quarter. Prior to the date in
the Current Quarter on which the Agent receives the
Compliance Certificate for the Preceding Quarter which is
required to be delivered during the Current Quarter, the
Commitment Fee Percentage shall be the same as was
applicable in the Preceding Quarter, subject to any
necessary adjustment pursuant to this paragraph upon
receipt of such subsequent Compliance Certificate,
effective as of the beginning of the Current Quarter;
provided, that the Commitment Fee Percentage for any day
after the fifty-fifth day of any calendar quarter in which
the Company shall not deliver a Compliance Certificate
shall equal the next higher Commitment Fee Percentage as
set forth in the table above immediately below the
previously effective Commitment Fee Percentage; thus if the
Commitment Fee Percentage had previously been 0.18750%, a
failure to deliver the Compliance Certificate by the fifty-
fifth day of the Current Quarter would cause the Commitment
Fee Percentage to be 0.20000% for the duration of that
quarter. If the subsequent Compliance Certificate shall
indicate that the Commitment Fee Percentage should have
been increased for the Current Quarter pursuant to this
paragraph, then the Company shall pay on the date of
delivery of such Compliance Certificate, to the Agent for
the account of the Banks, an amount equal to the positive
difference, if any, between (i) the aggregate amount of
commitment fees which would theretofore have been payable
during such Current Quarter had such increase been made on
the first day of such Current Quarter and (ii) the amount
of commitment fees which the Company actually paid during
such Current Quarter. If such Compliance Certificate shall
indicate that the Company paid more commitment fees than
would have been required if any reduction therein required
by this paragraph had commenced on the first day of such
Current Quarter, any such excess payment shall be credited
Page 7
</Page>
<PAGE>
to future payments of commitment fees and other amounts
payable by the Company hereunder. Any such credit to
future payments of commitment fees shall in each case be
made first to the next occurring payment of commitment fees
due hereunder.
"Committed Borrowing" means a Borrowing hereunder
consisting of Committed Loans made on the same day by
the Banks ratably according to their respective Pro
Rata Shares and, in the case of Offshore Rate
Committed Loans, having the same Interest Periods.
"Committed Loan" means a Loan by a Bank to the
Company under Section 2.01, and may be an Offshore
Rate Committed Loan or a Base Rate Committed Loan
(each, a "Type" of Committed Loan).
"Committed Loan Note" has the meaning specified in
Section 2.02.
"Competitive Bid" means an offer by a Bank to
make a Bid Loan in accordance with subsection 2.06(b).
"Competitive Bid Request" has the meaning
specified in subsection 2.06(a).
"Compliance Certificate" means a certificate
substantially in the form of Exhibit C.
"Consolidated Funded Indebtedness" means, as of the
date of determination, all Indebtedness of the Company and
its Subsidiaries representing all Indebtedness of the type
described in clauses (a), (c), (d) and (f) of the
definition of Indebtedness, and any Guaranty Obligation of
the Company or its Subsidiaries with respect to such
Indebtedness of another Person.
"Consolidated Interest Expense" means, for any period,
gross consolidated interest expense for the period
(including all commissions, discounts, fees and other
charges in connection with standby letters of credit and
similar instruments) for the Company and its Subsidiaries.
"Consolidated Net Income" means for any period the
gross revenues from operations of the Company and its
Subsidiaries less all their operating and non-operating
expenses (including taxes on income), but excluding all
amounts with respect to the operations of any Subsidiary
for any period prior to the time it shall have become a
Subsidiary.
Page 8
</Page>
<PAGE>
"Consolidated Net Worth" means, as of the date of
determination, the consolidated shareholders' equity of the
Company and its Subsidiaries; provided, however, that any
reduction in shareholders' equity directly resulting from a
change in GAAP shall be disregarded in determining
Consolidated Net Worth for the purposes of this Agreement,
but only if and to the extent such change is (a) (i) a
mandatory change required as a result of a definitive
pronouncement by the Financial Accounting Standards Board
and (ii) concurred with by the Company's Independent
Auditors; and (b) has no cash or other working capital
effect on the consolidated balance sheet of the Company.
"Consolidated Total Assets" means, as of the date of
determination, the consolidated total assets of the Company
and its Subsidiaries.
"Contingent Obligation" means, as to any Person, any
direct or indirect liability of that Person, whether or not
contingent, with or without recourse, (a) with respect to
any Indebtedness, lease, dividend, letter of credit or
other obligation (the "primary obligations") of another
Person (the "primary obligor"), including any obligation of
that Person (i) to purchase, repurchase or otherwise
acquire such primary obligations or any security therefor,
(ii) to advance or provide funds for the payment or
discharge of any such primary obligation, or to maintain
working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any
balance sheet item, level of income or financial condition
of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of
assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such
primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against
loss in respect thereof (each with respect to the items in
this clause (a), a "Guaranty Obligation"); (b) with respect
to any Surety Instrument issued for the account of that
Person or as to which that Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any
materials, supplies or other property from, or to obtain
the services of, another Person if the relevant contract or
other related document or obligation requires that payment
for such materials, supplies or other property, or for such
services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or
tendered, or such services are ever performed or tendered,
or (d) in respect of any Swap Contract. The amount of any
Contingent Obligation shall, in the case of Guaranty
Obligations, be deemed equal to the stated or determinable
Page 9
</Page>
<PAGE>
amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if
indeterminable, the maximum reasonably anticipated
liability in respect thereof, and in the case of other
Contingent Obligations other than in respect of Swap
Contracts, shall be equal to the maximum reasonably
anticipated liability in respect thereof and, in the case
of Contingent Obligations in respect of Swap Contracts,
shall be equal to the Swap Termination Value.
"Contractual Obligation" means, as to any Person, any
provision of any security issued by such Person or of any
agreement, undertaking, contract, indenture, mortgage, deed
of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its
property is bound.
"Conversion/Continuation Date" means any date on
which, under Section 2.04, the Company (a) converts
Committed Loans of one Type to another Type, or (b)
continues as Committed Loans of the same Type, but with a
new Interest Period, Committed Loans having Interest
Periods expiring on such date.
"Current Quarter" has the meaning specified in the
definition of Applicable Margin.
"Default" means any event or circumstance which, with
the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied during such time)
constitute an Event of Default.
"Dollars", "dollars" and "$" each mean lawful money of
the United States.
"EBITDA" means, for any period, for the Company and
its Subsidiaries on a consolidated basis, the sum of (a)
the net income (or net loss) for such period plus (b) all
amounts treated as expenses for depreciation, interest and
the amortization of intangibles of any kind to the extent
included in the determination of such net income (or loss),
plus (c) all accrued taxes on or measured by income to the
extent included in the determination of such net income (or
loss); provided, however, that (i) net income (or loss)
shall be computed for these purposes without giving effect
to extraordinary losses or extraordinary gains; and (ii)
all amounts with respect to the foregoing items with
respect to (A) any Subsidiary acquired during the 12-month
period ending on the Closing Date and listed on Schedule
1.01 and (B) any Subsidiary acquired after the Closing Date
in an Approved Acquisition shall be included in the
Page 10
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<PAGE>
calculation of EBITDA for any relevant period prior to the
time it shall have become a Subsidiary.
"Eligible Assignee" means (a) a commercial bank
organized under the laws of the United States, or any state
thereof, and having a combined capital and surplus of at
least $100,000,000; (b) a commercial bank organized under
the laws of any other country which is a member of the
Organization for Economic Cooperation and Development (the
"OECD"), or a political subdivision of any such country,
and having a combined capital and surplus of at least
$100,000,000, provided that such bank is acting through a
branch or agency located in the United States; and (c) a
Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank,
(ii) a Subsidiary of a Person of which a Bank is a
Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary; provided that such Person is acting through a
branch or agency located in the United States. No proposed
assignee shall be an Eligible Assignee if the effect of the
assignment to the proposed assignee would be to impose
increased costs on the Company pursuant to Section 3.01.
"Environmental Claims" means all claims, however
asserted, by any Governmental Authority or other Person
alleging potential liability or responsibility for
violation of any Environmental Law, or for release or
injury to the environment.
"Environmental Laws" means all federal, state or local
laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative
orders, directed duties, requests, licenses, authorizations
and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental,
health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security
Act of 1974, and regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) under common control with the Company
within the meaning of Section 414(b) or (c) of the Code
(and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with
respect to a Pension Plan; (b) a withdrawal by the Company
or any ERISA Affiliate from a Pension Plan subject to
Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of
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<PAGE>
ERISA) or a cessation of operations which is treated as
such a withdrawal under Section 4062(e) of ERISA; (c) a
complete or partial withdrawal by the Company or any ERISA
Affiliate from a Multiemployer Plan or notification that a
Multiemployer Plan is in reorganization; (d) the filing of
a notice of intent to terminate, the treatment of a Plan
amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Pension Plan or Multiemployer Plan; (e) an
event or condition which might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f)
the imposition of any liability under Title IV of ERISA,
other than PBGC premiums due but not delinquent under
Section 4007 of ERISA, upon the Company or any ERISA
Affiliate.
"Event of Default" means any of the events or
circumstances specified in Section 8.01.
"Exchange Act" means the Securities Exchange Act of
1934, and regulations promulgated thereunder.
"Existing Lines of Business" means those lines of
business carried on by the Company and its Subsidiaries on
the date hereof.
"FDIC" means the Federal Deposit Insurance
Corporation, and any Governmental Authority succeeding to
any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set
forth in the weekly statistical release designated as
H.15(519), or any successor publication, published by the
Federal Reserve Bank of New York (including any such
successor, "H.15(519)") on the preceding Business Day
opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be
the arithmetic mean as determined by the Agent of the rates
for the last transaction in overnight Federal funds
arranged prior to 9:00 a.m. (New York City time) on that
day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Fee Letter" has the meaning specified in subsection
2.11(a).
"FRB" means the Board of Governors of the Federal
Reserve System, and any Governmental Authority succeeding
to any of its principal functions.
Page 12
</Page>
<PAGE>
"Further Taxes" means any and all present or future
taxes, levies, assessments, imposts, duties, deductions,
fees, withholdings or similar charges (including, without
limitation, net income taxes and franchise taxes), and all
liabilities with respect thereto, imposed by any
jurisdiction on account of amounts payable or paid pursuant
to Section 3.01.
"GAAP" means generally accepted accounting principles
set forth from time to time in the opinions and
pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as
of the date of application.
"Governmental Authority" means any nation or
government, any state or other political subdivision
thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled,
through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" has the meaning specified in the
definition of "Contingent Obligation."
"Indebtedness" of any Person means, without
duplication, (a) all indebtedness for borrowed money; (b)
all obligations issued, undertaken or assumed as the
deferred purchase price of property or services (other than
trade payables and accrued liabilities incurred in the
ordinary course of business on ordinary terms); (c) all non-
contingent reimbursement or payment obligations with
respect to Surety Instruments; (d) all obligations
evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or
businesses; (e) all indebtedness created or arising under
any conditional sale or other title retention agreement, or
incurred as financing, in either case with respect to
property acquired by the Person (even though the rights and
remedies of the seller or bank under such agreement in the
event of default are limited to repossession or sale of
such property); (f) all obligations with respect to capital
leases; (g) all indebtedness referred to in clauses (a)
through (f) above secured by (or for which the holder of
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such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such
Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness; and (h) all
Guaranty Obligations in respect of indebtedness or
obligations of others of the kinds referred to in clauses
(a) through (g) above.
For all purposes of this Agreement, the Indebtedness of any
Person shall include all recourse Indebtedness of any
partnership, joint venture or limited liability company in
which such Person is a general partner, a joint venturer or
a member.
"Indemnified Liabilities" has the meaning specified in
Section 10.05.
"Indemnified Person" has the meaning specified in
Section 10.05.
"Independent Auditor" has the meaning specified in
subsection 6.01(a).
"Insolvency Proceeding" means, with respect to any
Person, (a) any case, action or proceeding with respect to
such Person before any court or other Governmental
Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-
up or relief of debtors, or (b) any general assignment for
the benefit of creditors, composition, marshalling of
assets for creditors, or other, similar arrangement in
respect of its creditors generally or any substantial
portion of its creditors; undertaken under U.S. Federal,
state or foreign law, including the Bankruptcy Code.
"Interest Coverage Ratio" means for any period the
ratio of EBITDA to Consolidated Interest Expense.
"Interest Payment Date" means, as to any Loan other
than a Base Rate Committed Loan, the last day of each
Interest Period applicable to such Loan and, as to any Base
Rate Committed Loan, the last Business Day of each calendar
quarter and each date such Committed Loan is converted into
another Type of Committed Loan, provided, however, that
(a) if any Interest Period for an Offshore Rate Committed
Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each
Interest Payment Date thereafter is also an Interest
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<PAGE>
Payment Date, and (b) as to any Bid Loan, such intervening
dates prior to the maturity thereof as may be specified by
the Company and agreed to by the applicable Bank in the
applicable Competitive Bid shall also be Interest Payment
Dates.
"Interest Period" means, (a) as to any Offshore Rate
Committed Loan, the period commencing on the Borrowing Date
of such Loan, or on the Conversion/Continuation Date on
which such Loan is converted into or continued as an
Offshore Rate Committed Loan, and ending on the date one,
two, three or six months thereafter as selected by the
Company in its Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be; (b) as to any
LIBOR Bid Loan, the period commencing on the date such Loan
is disbursed and ending on the date one, two, three, six or
twelve months thereafter as selected by the Company in its
Competitive Bid Request; and (c) as to any Absolute Rate
Bid Loan, a period of not less than 14 days and not more
than 365 days as selected by the Company in the applicable
Competitive Bid Request;
provided that:
(i) if any Interest Period would otherwise
end on a day that is not a Business Day, that Interest
Period shall be extended to the following Business Day
unless, in the case of an Offshore Rate Loan, the
result of such extension would be to carry such
Interest Period into another calendar month, in which
event such Interest Period shall end on the preceding
Business Day;
(ii) any Interest Period pertaining to an
Offshore Rate Loan that begins on the last Business
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end
of such Interest Period; and
(iii) no Interest Period for any Loan shall
extend beyond February 28, 2001.
"Invitation for Competitive Bids" means a
solicitation for Competitive Bids, substantially in
the form of Exhibit F.
"IRS" means the Internal Revenue Service, and any
Governmental Authority succeeding to any of its principal
functions under the Code.
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<PAGE>
"Joint Venture" means a single-purpose corporation,
partnership, limited liability company, joint venture or
other similar legal arrangement (whether created by
contract or conducted through a separate legal entity) now
or hereafter formed by the Company or any of its
Subsidiaries with another Person in order to conduct a
common venture or enterprise with such Person.
"Lending Office" means, as to any Bank, the office or
offices of such Bank specified as its "Lending Office" or
"Domestic Lending Office" or "Offshore Lending Office", as
the case may be, on Schedule 10.02, or such other office or
offices as such Bank may from time to time notify the
Company and the Agent.
"Leverage Ratio" means for any period the ratio of
Consolidated Funded Indebtedness to EBITDA.
"LIBO Rate" means, for any Interest Period with
respect to a LIBOR Bid Loan or Offshore Rate Committed
Loan, the rate of interest per annum determined by the
Agent to be the arithmetic mean (rounded upward to the
nearest 1/16th of 1%) of the rates of interest per annum
notified to the Agent by BofA as the rate of interest at
which dollar deposits in the approximate amount of, in the
case of LIBOR Bid Loans, the LIBOR Bid Loans to be borrowed
in such Bid Loan Borrowing, and, in the case of Offshore
Rate Committed Loans, the Offshore Rate Committed Loan to
be made by BofA, and having a maturity comparable to such
Interest Period, would be offered to major banks in the
London interbank market at their request at approximately
11:00 a.m. (London time) two Business Days prior to the
commencement of such Interest Period.
"LIBOR Auction" means a solicitation of Competi
tive Bids setting forth a LIBOR Bid Margin pursuant to
Section 2.06.
"LIBOR Bid Loan" means any Bid Loan that bears
interest at a rate based upon the LIBO Rate.
"LIBOR Bid Margin" has the meaning specified in
subsection 2.06(c)(ii)(C).
"Lien" means any security interest, mortgage, deed of
trust, pledge, hypothecation, assignment, charge or deposit
arrangement, encumbrance, lien (statutory or other) or
preferential arrangement of any kind or nature whatsoever
in respect of any property (including those created by,
arising under or evidenced by any conditional sale or other
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<PAGE>
title retention agreement, the interest of a lessor under a
capital lease, any financing lease having substantially the
same economic effect as any of the foregoing, or the filing
of any financing statement naming the owner of the asset to
which such lien relates as debtor, under the Uniform
Commercial Code or any comparable law) and any contingent
or other agreement to provide any of the foregoing, but not
including the interest of a lessor under an operating
lease.
"Loan" means an extension of credit by a Bank to the
Company under Article II, and may be a Committed Loan or a
Bid Loan.
"Loan Documents" means this Agreement, any Notes, the
Subsidiary Guaranty(ies), the Fee Letter and all other
documents delivered to the Agent or any Bank in connection
herewith.
"Major Acquisition" has the meaning specified in the
definition of Approved Acquisition.
"Majority Banks" means (a) at any time prior to the
Revolving Termination Date, or after the Revolving
Termination Date if no Loans are then outstanding, Banks
then holding more than 51% of the Commitments, and
(b) otherwise, Banks then holding more than 51% of the then
aggregate unpaid principal amount of the Loans.
"Margin Stock" means "margin stock" as such term is
defined in Regulation G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse
change in, or a material adverse effect upon, the
operations, business, properties, condition (financial or
otherwise) or prospects of the Company or the Company and
its Subsidiaries taken as a whole; (b) a material
impairment of the ability of the Company to perform under
any Loan Document and to avoid any Event of Default; or (c)
a material adverse effect upon the legality, validity,
binding effect or enforceability against the Company of any
Loan Document. For purposes of this definition, a
liability shall be considered to be material if it involves
a cost to or expenditure by the Company of $15,000,000 or
more, net of amounts recoverable from insurers where
coverage is not contested or pursuant to uncontested rights
of subrogation, contribution or indemnity.
"Material Subsidiary" means any Subsidiary whose total
assets constitute 10% or more of Consolidated Total Assets,
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<PAGE>
in each case based upon the Company's most recent annual or
quarterly financial statements delivered to the Agent under
Section 6.01.
"Multiemployer Plan" means a "multiemployer plan",
within the meaning of Section 4001(a)(3) of ERISA, to which
the Company or any ERISA Affiliate makes, is making, or is
obligated to make contributions or, during the preceding
three calendar years, has made, or been obligated to make,
contributions.
"Net Issuance Proceeds" means, in respect of any
issuance of common or preferred equity, cash proceeds
received in connection therewith, net of ordinary and
necessary out-of-pocket costs and expenses paid or incurred
in connection therewith in favor of any Person not an
Affiliate of the Company.
"Notes" means the Committed Loan Notes and the Bid
Loan Notes.
"Notice of Borrowing" means a notice in substantially
the form of Exhibit A.
"Notice of Conversion/Continuation" means a notice in
substantially the form of Exhibit B.
"Obligations" means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan
Document, owing by the Company to any Bank, the Agent, or
any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or
contingent, due or to become due, now existing or hereafter
arising.
"Offshore Rate Committed Loan" means any Committed
Loan that bears interest based on the LIBO Rate.
"Offshore Rate Loan" means a Loan that bears interest
based on the LIBO Rate.
"Organization Documents" means, for any corporation,
the certificate or articles of incorporation, the bylaws,
any certificate of determination or instrument relating to
the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable
resolutions of the board of directors (or any committee
thereof) of such corporation.
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<PAGE>
"Other Taxes" means any present or future stamp, court
or documentary taxes or any other excise or property taxes,
charges or similar levies which arise from any payment made
hereunder or from the execution, delivery, performance,
enforcement or registration of, or otherwise with respect
to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in subsection
10.08(d).
"PBGC" means the Pension Benefit Guaranty Corporation,
or any Governmental Authority succeeding to any of its
principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA which
the Company sponsors, maintains, or to which it makes, is
making, or is obligated to make contributions, or in the
case of a multiple employer plan (as described in Section
4064(a) of ERISA) has made contributions at any time during
the immediately preceding five (5) plan years.
"Permitted Liens" has the meaning specified in Section
7.01.
"Permitted Swap Obligations" means all obligations
(contingent or otherwise) of the Company or any Subsidiary
existing or arising under Swap Contracts, provided that
each of the following criteria is satisfied: (a) such
obligations are (or were) entered into by such Person in
the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments
or assets held by such Person, or changes in the value of
securities issued by such Person in conjunction with a
securities repurchase program not otherwise prohibited
hereunder, and not for purposes of speculation or taking a
"market view;" and (b) such Swap Contracts do not contain
(i) any provision ("walk-away" provision) exonerating the
non-defaulting party from its obligation to make payments
on outstanding transactions to the defaulting party, or
(ii) any provision creating or permitting the declaration
of an event of default, termination event or similar event
upon the occurrence of an Event of Default hereunder (other
than an Event of Default under subsection 8.01(a)).
"Person" means an individual, partnership,
corporation, limited liability company, business trust,
joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
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<PAGE>
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which the Company sponsors or
maintains or to which the Company makes, is making, or is
obligated to make contributions and includes any Pension
Plan.
"Preceding Quarter" has the meaning specified in the
definition of Applicable Margin.
"Pro Rata Share" means, as to any Bank at any time,
the percentage equivalent (expressed as a decimal, rounded
to the ninth decimal place) at such time of such Bank's
Commitment divided by the combined Commitments of all
Banks.
"Replacement Bank" has the meaning specified in
Section 3.08.
"Reportable Event" means any of the events set forth
in Section 4043(c) of ERISA or the regulations thereunder,
other than any such event for which the 30-day notice
requirement under ERISA has been waived in regulations
issued by the PBGC.
"Required Banks" means (a) at any time prior to the
Revolving Termination Date, or after the Revolving
Termination Date if no Loans are then outstanding, Banks
then holding at least 66-2/3% of the Commitments, and
(b) otherwise, Banks then holding at least 66-2/3% of the
then aggregate unpaid principal amount of the Loans.
"Requirement of Law" means, as to any Person, any law
(statutory or common), treaty, rule or regulation or
determination of an arbitrator or of a Governmental
Authority, in each case applicable to or binding upon the
Person or any of its property or to which the Person or any
of its property is subject.
"Responsible Officer" means the chief executive
officer or the president of the Company (or any other
officer having substantially the same authority and
responsibility) or the vice president and chief financial
officer of the Company (or any other officer having
substantially the same authority and responsibility); and,
with respect certification of financial statements or
compliance with financial covenants, the treasurer of the
Company (or any other officer having substantially the same
authority and responsibility).
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<PAGE>
"Revolving Termination Date" means the earlier to
occur of:
(a) February 28, 2001; and
(b) the date on which the Commitments
terminate in accordance with the provisions of this
Agreement.
"SEC" means the Securities and Exchange Commission, or
any Governmental Authority succeeding to any of its
principal functions.
"Subsidiary" of a Person means any corporation,
association, partnership, limited liability company, joint
venture or other business entity of which more than 50% of
the voting stock, membership interests or other equity
interests (in the case of Persons other than corporations),
is owned or controlled directly or indirectly by the
Person, or one or more of the Subsidiaries of the Person,
or a combination thereof. Unless the context otherwise
clearly requires, references herein to a "Subsidiary" refer
to a Subsidiary of the Company.
"Subsidiary Guaranty" shall mean a guaranty
substantially in the form of Exhibit K.
"Surety Instruments" means all letters of credit
(including standby and commercial), banker's acceptances,
bank guaranties, shipside bonds, surety bonds and similar
instruments.
"Swap Contract" means any agreement, whether or not in
writing, relating to any transaction that is a rate swap,
basis swap, forward rate transaction, commodity swap,
commodity option, equity or equity index swap or option,
bond, note or bill option, interest rate option, forward
foreign exchange transaction, cap, collar or floor
transaction, currency swap, cross-currency rate swap,
swaption, currency option or any other, similar transaction
(including any option to enter into any of the foregoing)
or any combination of the foregoing, and, unless the
context otherwise clearly requires, any master agreement
relating to or governing any or all of the foregoing.
"Swap Termination Value" means, in respect of any one
or more Swap Contracts, after taking into account the
effect of any legally enforceable netting agreement
relating to such Swap Contracts, (a) for any date on or
after the date such Swap Contracts have been closed out and
termination value(s) determined in accordance therewith,
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<PAGE>
such termination value(s), and (b) for any date prior to
the date referenced in clause (a) the amount(s) determined
as the mark-to-market value(s) for such Swap Contracts, as
determined based upon one or more mid-market or other
readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include any Bank).
"Taxes" means any and all present or future taxes,
levies, assessments, imposts, duties, deductions, fees,
withholdings or similar charges, and all liabilities with
respect thereto, excluding, in the case of each Bank and
the Agent, respectively, taxes imposed on or measured by
its net income (or taxes imposed in lieu of such net income
taxes) by the jurisdiction (or any political subdivision
thereof) under the laws of which such Bank or the Agent, as
the case may be, is organized or maintains a lending
office.
"Type" has the meaning specified in the definition of
"Committed Loan."
"Unfunded Pension Liability" means the excess of a
Plan's benefit liabilities under Section 4001(a)(16) of
ERISA over the current value of that Plan's assets,
determined in accordance with the assumptions used for
funding the Pension Plan pursuant to Section 412 of the
Code for the applicable plan year.
"United States" and "U.S." each means the United
States of America.
"Wholly-Owned Subsidiary" means any corporation in
which (other than directors' qualifying shares required by
law) 100% of the capital stock of each class having
ordinary voting power, and 100% of the capital stock of
every other class, in each case, at the time as of which
any determination is being made, is owned, beneficially and
of record, by the Company, or by one or more of the other
Wholly-Owned Subsidiaries, or both.
1.02 Other Interpretive Provisions. (a) The meanings of
defined terms are equally applicable to the singular and plural
forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and
similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and subsection, Section,
Schedule and Exhibit references are to this Agreement unless
otherwise specified.
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<PAGE>
(c) (i) The term "documents" includes any and all
instruments, documents, agreements, certificates, indentures,
notices and other writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) The term "to the best knowledge of the
Company", or any other term of similar import, means to the
actual knowledge of any executive officer of the Company or
any employee of the Company with management responsibility
for the subject matter as to which the Company's knowledge
is relevant.
(iv) In the computation of periods of time from
a specified date to a later specified date, the word "from"
means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to
and including."
(d) Unless otherwise expressly provided herein, (i)
references to agreements (including this Agreement) and other
contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only
to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii)
references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating,
amending, replacing, supplementing or interpreting the statute
or regulation.
(e) The captions and headings of this Agreement are
for convenience of reference only and shall not affect the
interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use
several different limitations, tests or measurements to regulate
the same or similar matters. All such limitations, tests and
measurements are cumulative and shall each be performed in
accordance with their terms. Unless otherwise expressly
provided, any reference to any action of the Agent or the Banks
by way of consent, approval or waiver shall be deemed modified
by the phrase "in its/their sole discretion."
(g) This Agreement and the other Loan Documents are
the result of negotiations among and have been reviewed by
counsel to the Agent, the Company and the other parties, and are
the products of all parties. Accordingly, they shall not be
construed against the Banks or the Agent merely because of the
Agent's or Banks' involvement in their preparation.
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<PAGE>
1.03 Accounting Principles. (a) Unless the context
otherwise clearly requires, all accounting terms not expressly
defined herein shall be construed, and all financial
computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied (including changes
required by the application thereof).
(b) References herein to "fiscal year" and "fiscal
quarter" refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.01 Amounts and Terms of Commitments. Each Bank
severally agrees, on the terms and conditions set forth herein,
to make loans to the Company from time to time on any Business
Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate amount not to exceed at any
time outstanding the amount set forth on Schedule 2.01 (such
amount, as the same may be reduced under Section 2.07 or as a
result of one or more assignments under Section 10.08, the
Bank's "Commitment"); provided, however, that, after giving
effect to any Committed Borrowing, the aggregate principal
amount of all outstanding Loans shall not at any time exceed the
combined Commitments. Within the limits of each Bank's
Commitment, and subject to the other terms and conditions
hereof, the Company may borrow under this Section 2.01, prepay
under Section 2.08 and reborrow under this Section 2.01.
2.02 Loan Accounts. (a) The Loans made by each Bank
shall be evidenced by one or more loan accounts or records
maintained by such Bank in the ordinary course of business. The
loan accounts or records maintained by the Agent and each Bank
shall be conclusive absent manifest error of the amount of the
Loans made by the Banks to the Company and the interest and
payments thereon. Any failure so to record or any error in
doing so shall not, however, limit or otherwise affect the
obligation of the Company hereunder to pay any amount owing with
respect to the Loans.
(b) Upon the request of any Bank made through the
Agent, the Committed Loans made by such Bank may be evidenced by
one or more notes in the form of Exhibit I ("Committed Loan
Notes") and the Bid Loans made by such Bank may be evidenced by
one or more notes in the form of Exhibit J ("Bid Loan Notes"),
instead of or in addition to loan accounts. Each such Bank
shall endorse on the schedules annexed to its Note(s) the date,
amount and maturity of each Loan made by it and the amount of
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<PAGE>
each payment of principal made by the Company with respect
thereto. Each such Bank is irrevocably authorized by the
Company to endorse its Note(s) and each Bank's record shall be
conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation
thereon with respect to any Loan shall not limit or otherwise
affect the obligations of the Company hereunder, under any such
Note, or under any other Loan Document, to such Bank.
2.03 Procedure for Committed Borrowing. (a) Each
Committed Borrowing shall be made upon the Company's irrevocable
written notice delivered to the Agent in the form of a Notice of
Borrowing (which notice must be received by the Agent prior to
9:00 a.m. (San Francisco time) at least (i) three Business Days
prior to the requested Borrowing Date, in the case of Offshore
Rate Committed Loans; and (ii) one Business Day prior to the
requested Borrowing Date, in the case of Base Rate Committed
Loans) specifying:
(A) the amount of the Committed Borrowing,
which shall be in an aggregate minimum amount of $5,000,000 or
any multiple of $1,000,000 in excess thereof;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Committed Borrowing; and
(D) if applicable, the duration of the
Interest Period applicable to such Committed Loans included in
such notice. If the Notice of Borrowing fails to specify the
duration of the Interest Period for any Committed Borrowing
comprised of Offshore Rate Committed Loans, such Interest Period
shall be three months.
(b) The Agent will promptly notify each Bank of its
receipt of any Notice of Borrowing and of the amount of such
Bank's Pro Rata Share of that Committed Borrowing.
(c) Each Bank will make the amount of its Pro Rata
Share of each Committed Borrowing available to the Agent for the
account of the Company at the Agent's Payment Office by
11:00 a.m. (San Francisco time) on the Borrowing Date requested
by the Company in funds immediately available to the Agent. The
proceeds of all such Committed Loans will then be made available
to the Company by the Agent at such office by crediting the
account of the Company on the books of BofA with the aggregate
of the amounts made available to the Agent by the Banks and in
like funds as received by the Agent.
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<PAGE>
(d) After giving effect to any Committed Borrowing,
unless the Agent shall otherwise consent, there may not be more
than 10 different Interest Periods in effect in respect of all
Committed Loans and Bid Loans together then outstanding.
2.04 Conversion and Continuation Elections for Committed
Borrowings. (a) The Company may, upon irrevocable written
notice to the Agent in accordance with subsection 2.04(b):
(i) elect, as of any Business Day, in the case
of Base Rate Committed Loans, or as of the last day of the
applicable Interest Period, in the case of any other Type of
Committed Loans, to convert any such Committed Loans (or any
part thereof in an amount not less than $5,000,000, or that is
in an integral multiple of $1,000,000 in excess thereof) into
Committed Loans of any other Type; or
(ii) elect, as of the last day of the applicable
Interest Period, to continue any Committed Loans having
Interest Periods expiring on such day (or any part thereof
in an amount not less than $5,000,000, or that is in an
integral multiple of $1,000,000 in excess thereof);
provided, that if at any time the aggregate amount of Offshore
Rate Committed Loans in respect of any Committed Borrowing is
reduced, by payment, prepayment, or conversion of part thereof
to be less than $5,000,000, such Offshore Rate Committed Loans
shall automatically convert into Base Rate Committed Loans, and
on and after such date the right of the Company to continue such
Committed Loans as, and convert such Committed Loans into,
Offshore Rate Committed Loans shall terminate.
(b) The Company shall deliver a Notice of Conversion/
Continuation to be received by the Agent not later than 9:00
a.m. (San Francisco time) at least (i) three Business Days in
advance of the Conversion/Continuation Date, if the Committed
Loans are to be converted into or continued as Offshore Rate
Committed Loans; and (ii) one Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted
into Base Rate Committed Loans, specifying:
(A) the proposed
Conversion/Continuation Date;
(B) the aggregate amount of Committed
Loans to be continued;
(C) the Type of Committed Loans
resulting from the proposed conversion or
continuation; and
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<PAGE>
(D) other than in the case of
conversions into Base Rate Committed Loans, the
duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period
applicable to Offshore Rate Committed Loans the Company has
failed to select timely a new Interest Period to be applicable
to such Offshore Rate Committed Loans, or if any Default or
Event of Default then exists, the Company shall be deemed to
have elected to convert such Offshore Rate Committed Loans into
Base Rate Committed Loans effective as of the expiration date of
such Interest Period.
(d) The Agent will promptly notify each Bank of its
receipt of a Notice of Conversion/Continuation, or, if no timely
notice is provided by the Company, the Agent will promptly
notify each Bank of the details of any automatic conversion.
All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the
Committed Loans with respect to which the notice was given held
by each Bank.
(e) Unless the Required Banks otherwise consent,
during the existence of a Default or Event of Default the
Company may not elect to have a Committed Loan converted into or
continued as an Offshore Rate Committed Loan.
(f) After giving effect to any conversion or
continuation of Committed Loans, unless the Agent shall
otherwise consent, there may not be more than 10 different
Interest Periods in effect in respect of all Committed Loans and
Bid Loans together then outstanding.
2.05 Bid Borrowings. In addition to Committed Borrowings
pursuant to Section 2.03, each Bank severally agrees that the
Company may, as set forth in Section 2.06, from time to time
request the Banks prior to the Revolving Termination Date to
submit offers to make Bid Loans to the Company; provided,
however, that the Banks may, but shall have no obligation to,
submit such offers and the Company may, but shall have no
obligation to, accept any such offers; and provided, further,
that at no time shall (a) the outstanding aggregate principal
amount of all Bid Loans made by all Banks, plus the outstanding
aggregate principal amount of all Committed Loans made by all
Banks exceed the combined Commitments; or (b) the number of
Interest Periods for Bid Loans then outstanding plus the number
of Interest Periods for Committed Loans then outstanding exceeds
10.
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<PAGE>
2.06 Procedure for Bid Borrowings. (a) When the Company
wishes to request the Banks to submit offers to make Bid Loans
hereunder, it shall transmit to the Agent by telephone call
followed promptly by facsimile transmission a notice in
substantially the form of Exhibit G (a "Competitive Bid
Request") so as to be received no later than 7:00 a.m. (San
Francisco time) at least (x) four Business Days prior to the
date of a proposed Bid Borrowing in the case of a LIBOR Auction,
or (y) two Business Days prior to the date of a proposed Bid
Borrowing in the case of an Absolute Rate Auction, specifying:
(i) the date of such Bid Borrowing, which shall
be a Business Day;
(ii) the aggregate amount of such Bid Borrowing,
which shall be a minimum amount of $10,000,000 or in multiples
of $1,000,000 in excess thereof;
(iii) whether the Competitive Bids requested are
to be for LIBOR Bid Loans or Absolute Rate Bid Loans or both;
and
(iv) the duration of the Interest Period appli
cable thereto, subject to the provisions of the definition of
"Interest Period" herein.
Subject to subsection 2.06(c), the Company may not request
Competitive Bids for more than three Interest Periods in a
single Competitive Bid Request and may not request Competitive
Bids more than once in any period of five consecutive Business
Days.
(b) Upon receipt of a Competitive Bid Request, the
Agent will promptly send to the Banks by facsimile transmission
an Invitation for Competitive Bids, which shall constitute an
invitation by the Company to each Bank to submit Competitive
Bids offering to make the Bid Loans to which such Competitive
Bid Request relates in accordance with this Section 2.06.
(c) (i) Each Bank may at its discretion submit
a Competitive Bid containing an offer or offers to
make Bid Loans in response to any Invitation for Com
petitive Bids. Each Competitive Bid must comply with
the requirements of this subsection 2.06(c) and must
be submitted to the Agent by facsimile transmission at
the Agent's office for notices set forth on the
signature pages hereto not later than (1) 6:30 a.m.
(San Francisco time) three Business Days prior to the
proposed date of Borrowing, in the case of a LIBOR
Auction or (2) 6:30 a.m. (San Francisco time) on the
proposed date of Borrowing, in the case of an Absolute
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<PAGE>
Rate Auction; provided that Competitive Bids submitted
by the Agent (or any Affiliate of the Agent) in the
capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such Affiliate notifies the
Company of the terms of the offer or offers contained
therein not later than (A) 6:15 a.m. (San Francisco
time) three Business Days prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or
(B) 6:15 a.m. (San Francisco time) on the proposed
date of Borrowing, in the case of an Absolute Rate
Auction.
(ii) Each Competitive Bid shall be in
substantially the form of Exhibit H, specifying
therein:
(A) the proposed date of Borrowing;
(B) the principal amount of each
Bid Loan for which such Competitive Bid is being
made, which principal amount (x) may be equal to,
greater than or less than the Commitment of the
quoting Bank, (y) must be $10,000,000 or in
multiples of $1,000,000 in excess thereof, and
(z) may not exceed the principal amount of Bid
Loans for which Competitive Bids were requested;
(C) in case the Company elects a
LIBOR Auction, the margin above or below the LIBO
Rate (the "LIBOR Bid Margin") offered for each
such Bid Loan, expressed in multiples of 1/1000th
of one basis point to be added to or subtracted
from the applicable LIBO Rate and the Interest
Period applicable thereto;
(D) in case the Company elects an
Absolute Rate Auction, the rate of interest per
annum expressed in multiples of 1/1000th of one
basis point (the "Absolute Rate") offered for
each such Bid Loan; and
(E) the identity of the quoting
Bank.
A Competitive Bid may contain up to three separate
offers by the quoting Bank with respect to each Inter
est Period specified in the related Invitation for
Competitive Bids.
(iii) Any Competitive Bid shall be
disregarded if it:
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<PAGE>
(A) is not substantially in
conformity with Exhibit H or does not specify all
of the information required by subsection (c)(ii)
of this Section;
(B) contains qualifying,
conditional or similar language;
(C) proposes terms other than or
in addition to those set forth in the applicable
Invitation for Competitive Bids; or
(D) arrives after the time set
forth in subsection (c)(i).
(d) Promptly on receipt and not later than 7:00 a.m.
(San Francisco time) three Business Days prior to the proposed
date of Borrowing in the case of a LIBOR Auction, or 7:00 a.m.
(San Francisco time) on the proposed date of Borrowing in the
case of an Absolute Rate Auction, the Agent will notify the
Company of the terms (i) of any Competitive Bid submitted by a
Bank that is in accordance with subsection 2.06(c), and (ii) of
any Competitive Bid that amends, modifies or is otherwise
inconsistent with a previous Competitive Bid submitted by such
Bank with respect to the same Competitive Bid Request. Any such
subsequent Competitive Bid shall be disregarded by the Agent
unless such subsequent Competitive Bid is submitted solely to
correct a manifest error in such former Competitive Bid and only
if received within the times set forth in subsection 2.06(c).
The Agent's notice to the Company shall specify (1) the aggre
gate principal amount of Bid Loans for which offers have been
received for each Interest Period specified in the related
Competitive Bid Request; and (2) the respective principal
amounts and LIBOR Bid Margins or Absolute Rates, as the case may
be, so offered. Subject only to the provisions of
Sections 3.02, 3.05 and 4.02 hereof and the provisions of this
subsection (d), any Competitive Bid shall be irrevocable except
with the written consent of the Agent given on the written
instructions of the Company.
(e) Not later than 7:30 a.m. (San Francisco time)
three Business Days prior to the proposed date of Borrowing in
the case of a LIBOR Auction, or 7:30 a.m. (San Francisco time)
on the proposed date of Borrowing in the case of an Absolute
Rate Auction, the Company shall notify the Agent of its
acceptance or non-acceptance of the offers so notified to it
pursuant to subsection 2.06(d). The Company shall be under no
obligation to accept any offer and may choose to reject all
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<PAGE>
offers. In the case of acceptance, such notice shall specify
the aggregate principal amount of offers for each Interest
Period that is accepted. The Company may accept any Competitive
Bid in whole or in part; provided that:
(i) the aggregate principal amount of each
Bid Borrowing may not exceed the applicable amount set
forth in the related Competitive Bid Request;
(ii) the principal amount of each Bid
Borrowing must be $10,000,000 or in any multiple of
$1,000,000 in excess thereof;
(iii) acceptance of offers may only be made
on the basis of ascending LIBOR Bid Margins or
Absolute Rates within each Interest Period, as the
case may be; and
(iv) the Company may not accept any offer
that is described in subsection 2.06(c)(iii) or that
otherwise fails to comply with the requirements of
this Agreement.
(f) If offers are made by two or more Banks with the
same LIBOR Bid Margins or Absolute Rates, as the case may be,
for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related
Interest Period, the principal amount of Bid Loans in respect of
which such offers are accepted shall be allocated by the Agent
among such Banks as nearly as possible (in such multiples, not
less than $1,000,000, as the Agent may deem appropriate) in
proportion to the aggregate principal amounts of such offers.
Determination by the Agent of the amounts of Bid Loans shall be
conclusive in the absence of manifest error.
(g) (i) The Agent will promptly notify each Bank
having submitted a Competitive Bid if its offer has been
accepted and, if its offer has been accepted, of the amount
of the Bid Loan or Bid Loans to be made by it on the date
of the Bid Borrowing.
(ii) Each Bank which has received notice
pursuant to subsection 2.06(g)(i) that its Competitive
Bid has been accepted shall make the amounts of such
Bid Loans available to the Agent for the account of
the Company at the Agent's Payment Office, by
11:00 a.m. (San Francisco time) in the case of
Absolute Rate Bid Loans, and by 11:00 a.m. (San
Francisco time) in the case of LIBOR Bid Loans, on
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<PAGE>
such date of Bid Borrowing, in funds immediately
available to the Agent for the account of the Company
at the Agent's Payment Office. The proceeds of all
such Bid Loans will then be made available to the
Company by the Agent at such office by crediting the
account of the Company on the books of BofA with the
aggregate of the amounts made available to the Agent
by the Banks and in like funds as received by the
Agent.
(iii) Promptly following each Bid
Borrowing, the Agent shall notify each Bank of the
ranges of bids submitted and the highest and lowest
Bids accepted for each Interest Period requested by
the Company and the aggregate amount borrowed pursuant
to such Bid Borrowing.
(iv) From time to time, the Company and the
Banks shall furnish such information to the Agent as
the Agent may request relating to the making of Bid
Loans, including the amounts, interest rates, dates of
borrowings and maturities thereof, for purposes of the
allocation of amounts received from the Company for
payment of all amounts owing hereunder.
(h) If, on or prior to the proposed date of
Borrowing, the Commitments have not been terminated and if on
such proposed date of Borrowing all applicable conditions to
funding referenced in Sections 3.02, 3.05 and 4.02 hereof are
satisfied, the Banks whose offers the Company has accepted will
fund each Bid Loan so accepted. Nothing in this Section 2.06
shall be construed as a right of first offer in favor of the
Banks or to otherwise limit the ability of the Company to
request and accept credit facilities from any Person (including
any of the Banks), provided that no Default or Event of Default
would otherwise arise or exist as a result of the Company
executing, delivering or performing under such credit
facilities.
2.07 Voluntary Termination or Reduction of Commitments.
The Company may, upon not less than five Business Days' prior
notice to the Agent, terminate the Commitments, or permanently
reduce the Commitments by an aggregate minimum amount of
$10,000,000 or any multiple of $1,000,000 in excess thereof;
unless, after giving effect thereto and to any prepayments of
Committed Loans made on the effective date thereof, the then-
outstanding principal amount of the Loans would exceed the
amount of the combined Commitments then in effect. Once reduced
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<PAGE>
in accordance with this Section, the Commitments may not be
increased. Any reduction of the Commitments shall be applied to
each Bank according to its Pro Rata Share. All accrued
commitment fees to, but not including the effective date of any
reduction or termination of Commitments, shall be paid on the
effective date of such reduction or termination.
2.08 Optional Prepayments. (a) Subject to Section 3.04, the
Company may, at any time or from time to time, upon not less
than one Business Day's, in the case of Base Rate Committed
Loans, or three Business Days', in the case of Offshore Rate
Committed Loans, irrevocable notice to the Agent, ratably prepay
Committed Loans, in whole or in part, in minimum amounts of
$5,000,000 or any multiple of $1,000,000 in excess thereof.
Such notice of prepayment shall specify the date and amount of
such prepayment and the Type(s) of Committed Loans to be
prepaid. The Agent will promptly notify each Bank of its
receipt of any such notice and of such Bank's Pro Rata Share of
such prepayment. If such notice is given by the Company, the
Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date
specified therein, together with accrued interest to each such
date on the amount prepaid and any amounts required pursuant to
Section 3.04.
(b) Bid Loans may not be voluntarily prepaid.
2.09 Repayment. (a) The Company shall repay to the Banks
on the Revolving Termination Date the aggregate principal amount
of Loans outstanding on such date.
(b) The Company shall repay each Bid Loan on the last
day of the relevant Interest Period.
2.10 Interest. (a) Each Committed Loan shall bear
interest on the outstanding principal amount thereof from the
applicable Borrowing Date at a rate per annum equal to the LIBO
Rate or the Base Rate, as the case may be (and subject to the
Company's right to convert to other Types of Loans under Section
2.04), plus the Applicable Margin. Each Bid Loan shall bear
interest on the outstanding principal amount thereof from the
relevant Borrowing Date at a rate per annum equal to the LIBO
Rate plus (or minus) the LIBOR Bid Margin, or at the Absolute
Rate, as the case may be.
(b) Interest on each Loan shall be paid in arrears on
each Interest Payment Date. Interest shall also be paid on the
date of any prepayment of Committed Loans under Section 2.08 for
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<PAGE>
the portion of the Loans so prepaid and upon payment (including
prepayment) in full thereof and, during the existence of any
Event of Default, interest shall be paid on demand of the Agent
at the request or with the consent of the Required Banks.
(c) Notwithstanding subsection (a) of this Section,
while any Event of Default exists or after acceleration, the
Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the
principal amount of all outstanding Loans, at a rate per annum
which is determined by adding 3% per annum to the Applicable
Margin then in effect for such Loans; provided, however, that,
on and after the expiration of any Interest Period applicable to
any Offshore Rate Loan outstanding on the date of occurrence of
such Event of Default or acceleration, the principal amount of
such Loan shall, during the continuation of such Event of
Default or after acceleration, bear interest at a rate per annum
equal to the Base Rate plus 3%.
(d) Anything herein to the contrary notwithstanding,
the obligations of the Company to any Bank hereunder shall be
subject to the limitation that payments of interest shall not be
required for any period for which interest is computed
hereunder, to the extent (but only to the extent) that
contracting for or receiving such payment by such Bank would be
contrary to the provisions of any law applicable to such Bank
limiting the highest rate of interest that may be lawfully
contracted for, charged or received by such Bank, and in such
event the Company shall pay such Bank interest at the highest
rate permitted by applicable law.
2.11 Fees. (a) Arrangement, Agency Fees. The Company
shall pay an arrangement fee to the Arranger for the Arranger's
own account, and shall pay an agency fee and certain bid auction
fees to the Agent for the Agent's own account, as required by
the letter agreement ("Fee Letter") between the Company and the
Arranger and Agent dated November 21, 1995.
(b) Commitment Fees. The Company shall pay to the
Agent for the account of each Bank a commitment fee on the
average daily unused portion of such Bank's Commitment, computed
on a quarterly basis in arrears on the last Business Day of each
calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent, equal to the Commitment Fee
Percentage. For purposes of calculating utilization under this
Section, with respect to each Bank's Commitment, the making of
any Bid Loan by such Bank shall not be considered a use of a
portion of such Bank's Commitment. Such commitment fee shall
accrue from the Closing Date to the Revolving Termination Date
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<PAGE>
and shall be due and payable quarterly in arrears on the last
Business Day of each calendar quarter commencing on the first
such day this Agreement is executed by the Company through the
Revolving Termination Date, with the final payment to be made on
the Revolving Termination Date; provided that, in connection
with any reduction or termination of Commitments under
Section 2.07, the accrued commitment fee calculated for the
period ending on such date shall also be paid on the date of
such reduction or termination, with the following quarterly
payment being calculated on the basis of the period from such
reduction or termination date to such quarterly payment date.
The commitment fees provided in this subsection shall accrue at
all times after the above-mentioned commencement date, including
at any time during which one or more conditions in Article IV
are not met.
2.12 Computation of Fees and Interest. (a) All
computations of interest for Base Rate Committed Loans when the
Base Rate is determined by BofA's "reference rate" shall be made
on the basis of a year of 365 or 366 days, as the case may be,
and actual days elapsed. All other computations of fees and
interest shall be made on the basis of a 360-day year and actual
days elapsed (which results in more interest being paid than if
computed on the basis of a 365-day year). Interest and fees
shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day
thereof.
(b) Each determination of an interest rate by the
Agent shall be conclusive and binding on the Company and the
Banks in the absence of manifest error. The Agent will, at the
request of the Company or any Bank, deliver to the Company or
the Bank, as the case may be, a statement showing the quotations
used by the Agent in determining any interest rate.
2.13 Payments by the Company. (a) All payments to be made
by the Company shall be made without set-off, recoupment or
counterclaim. Except as otherwise expressly provided herein,
all payments by the Company shall be made to the Agent for the
account of the Banks at the Agent's Payment Office, and shall be
made in dollars and in immediately available funds, no later
than 10:00 a.m. (San Francisco time) on the date specified
herein. The Agent will promptly distribute to each Bank its Pro
Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment
received by the Agent later than 10:00 a.m. (San Francisco time)
shall be deemed to have been received on the following Business
Day and any applicable interest or fee shall continue to accrue.
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<PAGE>
(b) Subject to the provisions set forth in the
definition of "Interest Period" herein, whenever any payment is
due on a day other than a Business Day, such payment shall be
made on the following Business Day, and such extension of time
shall in such case be included in the computation of interest or
fees, as the case may be.
(c) Unless the Agent receives notice from the Company
prior to the date on which any payment is due to the Banks that
the Company will not make such payment in full as and when
required, the Agent may assume that the Company has made such
payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so
required), in reliance upon such assumption, distribute to each
Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent the Company has not made such
payment in full to the Agent, each Bank shall repay to the Agent
on demand such amount distributed to such Bank, together with
interest thereon at the Federal Funds Rate for each day from the
date such amount is distributed to such Bank until the date
repaid.
2.14 Payments by the Banks to the Agent. (a) Unless the
Agent receives notice from a Bank on or prior to the Closing
Date or, with respect to any Borrowing after the Closing Date,
at least one Business Day prior to the date of such Committed
Borrowing, that such Bank will not make available as and when
required hereunder to the Agent for the account of the Company
the amount of that Bank's Pro Rata Share of the Committed
Borrowing, the Agent may assume that each Bank has made such
amount available to the Agent in immediately available funds on
the Borrowing Date and the Agent may (but shall not be so
required), in reliance upon such assumption, make available to
the Company on such date a corresponding amount. If and to the
extent any Bank shall not have made its full amount available to
the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount,
that Bank shall on the Business Day following such Borrowing
Date make such amount available to the Agent, together with
interest at the Federal Funds Rate for each day during such
period. A notice of the Agent submitted to any Bank with
respect to amounts owing under this subsection (a) shall be
conclusive, absent manifest error. If such amount is so made
available, such payment to the Agent shall constitute such
Bank's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on
the Business Day following the Borrowing Date, the Agent will
notify the Company of such failure to fund and, upon demand by
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<PAGE>
the Agent, the Company shall pay such amount to the Agent for
the Agent's account, together with interest thereon (but not
including any amounts calculated under Section 3.04) for each
day elapsed since the date of such Committed Borrowing, at a
rate per annum equal to the interest rate applicable at the time
to the Committed Loans comprising such Committed Borrowing.
(b) The failure of any Bank to make any Committed Loan
on any Borrowing Date shall not relieve any other Bank of any
obligation hereunder to make a Committed Loan on such Borrowing
Date, but no Bank shall be responsible for the failure of any
other Bank to make the Committed Loan to be made by such other
Bank on any Borrowing Date.
2.15 Sharing of Payments, Etc. If, other than as expressly
provided elsewhere herein, any Bank shall obtain on account of
the Committed Loans made by it any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or
otherwise) in excess of its ratable share (or other share
contemplated hereunder), such Bank shall immediately (a) notify
the Agent of such fact, and (b) purchase from the other Banks
such participations in the Committed Loans made by them as shall
be necessary to cause such purchasing Bank to share the excess
payment pro rata with each of them; provided, however, that if
all or any portion of such excess payment is thereafter
recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the
purchasing Bank the purchase price paid therefor, together with
an amount equal to such paying Bank's ratable share (according
to the proportion of (i) the amount of such paying Bank's
required repayment to (ii) the total amount so recovered from
the purchasing Bank) of any interest or other amount paid or
payable by the purchasing Bank in respect of the total amount so
recovered. The Company agrees that any Bank so purchasing a
participation from another Bank may, to the fullest extent
permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 10.10) with respect
to such participation as fully as if such Bank were the direct
creditor of the Company in the amount of such participation.
The Agent will keep records (which shall be conclusive and
binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the
Banks following any such purchases or repayments.
2.16 Subsidiary Guaranty. The Obligations shall be
unconditionally, jointly and severally guaranteed by the
Material Subsidiaries pursuant to one or more Subsidiary
Guaranties.
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ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
3.01 Taxes. (a) Any and all payments by the Company to
each Bank or the Agent under this Agreement and any other Loan
Document shall be made free and clear of, and without deduction
or withholding for, any Taxes. In addition, the Company shall
pay all Other Taxes.
(b) If the Company shall be required by law to deduct
or withhold any Taxes, Other Taxes or Further Taxes from or in
respect of any sum payable hereunder to any Bank or the Agent,
then:
(i) the sum payable shall be increased as
necessary so that, after making all required deductions and
withholdings (including deductions and withholdings
applicable to additional sums payable under this Section),
such Bank or the Agent, as the case may be, receives and
retains an amount equal to the sum it would have received
and retained had no such deductions or withholdings been
made;
(ii) the Company shall make such deductions and
withholdings;
(iii) the Company shall pay the full amount
deducted or withheld to the relevant taxing authority or
other authority in accordance with applicable law; and
(iv) the Company shall also pay to each Bank or
the Agent for the account of such Bank, at the time interest
is paid, Further Taxes in the amount that the respective
Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed.
(c) The Company agrees to indemnify and hold harmless
each Bank and the Agent for the full amount of i) Taxes, ii)
Other Taxes, and iii) Further Taxes in the amount that the
respective Bank specifies as necessary to preserve the after-tax
yield the Bank would have received if such Taxes, Other Taxes or
Further Taxes had not been imposed, and any liability (including
penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes,
Other Taxes or Further Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within 30 days
after the date the Bank or the Agent makes written demand
therefor.
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<PAGE>
(d) Within 30 days after the date of any payment by
the Company of Taxes, Other Taxes or Further Taxes, the Company
shall furnish to each Bank or the Agent the original or a
certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to such Bank or the Agent.
(e) If the Company is required to pay any amount to
any Bank or the Agent pursuant to subsection (b) or (c) of this
Section, then such Bank shall use reasonable efforts (consistent
with legal and regulatory restrictions) to change the
jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue,
if such change in the sole judgment of such Bank is not
otherwise disadvantageous to such Bank.
3.02 Illegality. (a) If any Bank determines that the
introduction of any Requirement of Law, or any change in any
Requirement of Law, or in the interpretation or administration
of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that
it is unlawful, for any Bank or its applicable Lending Office to
make Offshore Rate Loans, then, on notice thereof by the Bank to
the Company through the Agent, any obligation of that Bank to
make Offshore Rate Loans (including in respect of any LIBOR Bid
Loan as to which the Company has accepted such Bank's
Competitive Bid, but as to which the Borrowing Date has not
arrived) shall be suspended until the Bank notifies the Agent
and the Company that the circumstances giving rise to such
determination no longer exist.
(b) If a Bank determines that it is unlawful for such
Bank to maintain any Offshore Rate Loan, the Company shall, upon
its receipt of notice of such fact and demand from such Bank
(with a copy to the Agent), prepay in full such Offshore Rate
Loans of that Bank then outstanding, together with interest
accrued thereon and amounts required under Section 3.04, either
on the last day of the Interest Period thereof, if the Bank may
lawfully continue to maintain such Offshore Rate Loans to such
day, or immediately, if the Bank may not lawfully continue to
maintain such Offshore Rate Loan. If the Company is required to
so prepay any Offshore Rate Committed Loan, then concurrently
with such prepayment, the Company shall borrow from the affected
Bank, in the amount of such repayment, a Base Rate Committed
Loan.
(c) If the obligation of any Bank to make or maintain
Offshore Rate Committed Loans has been so terminated or
suspended, the Company may elect, by giving notice to the Bank,
through the Agent, that all Loans which would otherwise be made
by the Bank as Offshore Rate Committed Loans shall be instead
Base Rate Committed Loans.
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<PAGE>
3.03 Increased Costs and Reduction of Return. (a) If any
Bank determines that, due to either (i) the introduction of or
any change in or in the interpretation of any law or regulation
or (ii) the compliance by that Bank with any guideline or
request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any
increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any Offshore Rate Committed Loans, then
the Company shall be liable for, and shall from time to time,
upon demand (with a copy of such demand to be sent to the
Agent), pay to the Agent for the account of such Bank,
additional amounts as are sufficient to compensate such Bank for
such increased costs.
(b) If any Bank shall have determined that (i) the
introduction of any Capital Adequacy Regulation, (ii) any change
in any Capital Adequacy Regulation, (iii) any change in the
interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority
charged with the interpretation or administration thereof, or
(iv) compliance by the Bank (or its Lending Office) or any
corporation controlling the Bank with any Capital Adequacy
Regulation, affects or would affect the amount of capital
required or expected to be maintained by the Bank or any
corporation controlling the Bank and (taking into consideration
such Bank's or such corporation's policies with respect to
capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a
consequence of its Commitment, loans, credits or obligations
under this Agreement, then, upon demand of such Bank to the
Company through the Agent, the Company shall pay to the Bank,
from time to time as specified by the Bank, additional amounts
sufficient to compensate the Bank for such increase.
3.04 Funding Losses. The Company shall reimburse each Bank
and hold each Bank harmless from any loss or expense which the
Bank may sustain or incur as a consequence of:
(a) the failure of the Company to make on a timely
basis any payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or
convert a Committed Loan after the Company has given (or is
deemed to have given) a Notice of Borrowing or a Notice of
Conversion/Continuation;
(c) the failure of the Company to make any prepayment
of any Committed Loan in accordance with any notice delivered
under Section 2.08;
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(d) the prepayment (including pursuant to Section
2.08) or other payment (including after acceleration thereof) of
any Offshore Rate Loan or Absolute Rate Bid Loan on a day that
is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.04 of any
Offshore Rate Committed Loan to a Base Rate Committed Loan on a
day that is not the last day of the relevant Interest Period;
including any such loss or expense arising from the liquidation
or reemployment of funds obtained by it to maintain its Offshore
Rate Loans or from fees payable to terminate the deposits from
which such funds were obtained. For purposes of calculating
amounts payable by the Company to the Banks under this Section
and under subsection 3.03(a), each Offshore Rate Committed Loan
made by a Bank (and each related reserve, special deposit or
similar requirement) shall be conclusively deemed to have been
funded at the LIBO Rate for such Offshore Rate Loan by a
matching deposit or other borrowing in the interbank eurodollar
market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
3.05 Inability to Determine Rates. If the Agent determines
that for any reason adequate and reasonable means do not exist
for determining the LIBO Rate for any requested Interest Period
with respect to a proposed Offshore Rate Loan, or that the LIBO
Rate applicable pursuant to subsection 2.10(a) for any requested
Interest Period with respect to a proposed Offshore Rate Loan
does not adequately and fairly reflect the cost to the Banks of
funding such Loan, the Agent will promptly so notify the Company
and each Bank. Thereafter, the obligation of the Banks to make
or maintain Offshore Rate Loans hereunder shall be suspended
until the Agent revokes such notice in writing. Upon receipt of
such notice, the Company may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the
Company does not revoke such Notice, the Banks shall make,
convert or continue the Committed Loans, as proposed by the
Company, in the amount specified in the applicable notice
submitted by the Company, but such Committed Loans shall be
made, converted or continued as Base Rate Committed Loans
instead of Offshore Rate Committed Loans.
3.06 Reserves on Offshore Rate Committed Loans. The
Company shall pay to each Bank, as long as such Bank shall be
required under regulations of the FRB to maintain reserves with
respect to liabilities or assets consisting of or including
Eurocurrency funds or deposits (currently known as "Eurocurrency
liabilities"), additional costs on the unpaid principal amount
of each Offshore Rate Committed Loan equal to the actual costs
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of such reserves allocated to such Committed Loan by the Bank
(as determined by the Bank in good faith, which determination
shall be conclusive absent manifest error), payable on each date
on which interest is payable on such Committed Loan, provided
the Company shall have received at least 15 days' prior written
notice (with a copy to the Agent) of such additional costs from
the Bank. If a Bank fails to give notice 15 days prior to the
relevant Interest Payment Date, such additional costs shall be
payable 15 days from receipt of such notice.
3.07 Certificates of Banks. Any Bank claiming
reimbursement or compensation under this Article III shall
deliver to the Company (with a copy to the Agent) a certificate
setting forth in reasonable detail the amount payable to the
Bank hereunder and such certificate shall be conclusive and
binding on the Company in the absence of manifest error.
3.08 Substitution of Banks. Upon the receipt by the
Company from any Bank (an "Affected Bank") of a claim for
compensation under Section 3.03, the Company may: (i) request
the Affected Bank to use its commercially reasonable efforts
(without any obligation to make any expenditure of funds) to
obtain a replacement bank or financial institution satisfactory
to the Company to acquire and assume all or a ratable part of
all of such Affected Bank's Loans and Commitment (a "Replacement
Bank"); provided, that such Affected Bank shall have no
liability if it is unable to obtain such a Replacement Bank;
(ii) request one more of the other Banks to acquire and assume
all or part of such Affected Bank's Loans and Commitment;
provided, that no Bank shall have any obligation to do so; or
(iii) designate a Replacement Bank. Any such designation of a
Replacement Bank under clause (i) or (iii) shall be subject to
the prior written consent of the Agent (which consent shall not
be unreasonably withheld or delayed). Any Replacement Bank
shall assume the Loans, the Commitments and the other rights and
obligations of such Affected Bank in accordance with the
procedures set forth in Section 10.08.
3.09 Survival The agreements and obligations of the
Company in this Article III shall survive the payment of all
other Obligations.
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ARTICLE IV
CONDITIONS PRECEDENT
4.01 Conditions of Initial Loans. The obligation of each
Bank to make its initial Committed Loan hereunder, and to
receive through the Agent the initial Competitive Bid Request,
is subject to the condition that the Agent shall have received
on or before the Closing Date all of the following, in form and
substance satisfactory to the Agent and each Bank, and in
sufficient copies for each Bank:
(a) Credit Agreement; Notes; Subsidiary Guaranty. (i)
This Agreement and, to the extent requested by any Bank, the
Note(s), executed by each party thereto; and (ii) the Subsidiary
Guaranty, executed by each Material Subsidiary;
(b) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of
directors of the Company and each Material Subsidiary
authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant
Secretary of such Person; and
(ii) A certificate of the Secretary or Assistant
Secretary of the Company and each Material Subsidiary
certifying the names and true signatures of the officers of
such Person authorized to execute, deliver and perform, as
applicable, this Agreement, the Subsidiary Guaranty and all
other Loan Documents to be delivered by it hereunder;
(c) Organization Documents; Good Standing. Each of the
following documents:
(i) the articles or certificate of incorporation
and the bylaws of the Company and each Material Subsidiary
as in effect on the Closing Date, certified by the Secretary
or Assistant Secretary of such Person as of the Closing
Date; and
(ii) a status certificate for the Company from
the Secretary of State of Oregon and similar certificate for
each Material Subsidiary from the Secretary of State or
similar applicable Governmental Authority of its state of
incorporation;
(d) Legal Opinion. An opinion of Stoel Rives LLP,
counsel to the Company and addressed to the Agent and the Banks,
substantially in the form of Exhibit D.
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(e) Payment of Fees. Evidence of payment by the
Company of all accrued and unpaid fees, costs and expenses to
the extent then due and payable on the Closing Date, together
with reasonable Attorney Costs of BofA to the extent invoiced
prior to or on the Closing Date, including any such costs, fees
and expenses arising under or referenced in Sections 2.11 and
10.04;
(f) Certificate. A certificate signed by a
Responsible Officer and similar officer of each Material
Subsidiary, dated as of the Closing Date, stating that:
(i) the representations and warranties contained
in Article V or in the Subsidiary Guaranty, as applicable,
are true and correct on and as of such date, as though made
on and as of such date;
(ii) no Default or Event of Default exists or
would result from the execution and delivery of the Loan
Documents to which the Company and each Material Subsidiary
is a party; and
(iii) there has occurred since April 2, 1995, no
event or circumstance that has resulted or could reasonably
be expected to result in a Material Adverse Effect; and
(g) Other Documents. Such other approvals, opinions,
documents or materials as the Agent or any Bank may reasonably
request.
4.02 Conditions to All Borrowings. The obligation of each
Bank to make any Committed Loan to be made by it, and the
obligation of any Bank to make any Bid Loan as to which the
Company has accepted the relevant Competitive Bid (including its
initial Loan), or to continue or convert any Committed Loan
under Section 2.04 is subject to the satisfaction of the
following conditions precedent on the relevant disbursement date
or Conversion/Continuation Date:
(a) Notice of Borrowing or
Conversion/Continuation. As to any Committed Loan, the Agent
shall have received (with, in the case of the initial Loan only,
a copy for each Bank) a Notice of Borrowing or a Notice of
Conversion/Continuation, as applicable;
(b) Continuation of Representations and
Warranties. The representations and warranties in Article V and
in the Subsidiary Guaranty(ies) shall be true and correct on and
as of such Borrowing Date or Conversion/Continuation Date with
the same effect as if made on and as of such disbursement date
or Conversion/Continuation Date; and
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(c) No Existing Default. No Default or Event of
Default shall exist or shall result from such Borrowing or
continuation or conversion.
Each Notice of Borrowing, Notice of Conversion/Continuation and
Competitive Bid Request submitted by the Company hereunder shall
constitute a representation and warranty by the Company
hereunder, as of the date of each such notice or request and as
of each disbursement date or Conversion/Continuation Date, as
applicable, that the conditions in this Section 4.02 are
satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each
Bank that:
5.01 Corporate Existence and Power. The Company and each
of its Subsidiaries:
(a) is a corporation duly organized, validly existing
and, if applicable in the jurisdiction of its incorporation, in
good standing under the laws of the jurisdiction of its
incorporation;
(b) (i) has the power and authority and all material
governmental licenses, authorizations, consents and approvals to
own its assets and carry on its business and (ii) has the power
and authority and all governmental licenses, authorizations,
consents and approvals to execute, deliver, and perform its
obligations under the Loan Documents;
(c) is duly qualified as a foreign corporation and is
licensed and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification or
license; and
(d) is in compliance with all material Requirements of
Law.
5.02 Corporate Authorization; No Contravention. The
execution, delivery and performance by the Company of this
Agreement and each other Loan Document to which it is a party
have been duly authorized by all necessary corporate action, and
do not and will not:
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(a) contravene the terms of any of the Company's
Organization Documents;
(b) conflict with or result in any breach or
contravention of, or the creation of any Lien under, any
document evidencing any Contractual Obligation to which the
Company is a party or any order, injunction, writ or decree of
any Governmental Authority to which the Company or its property
is subject; or
(c) violate any Requirement of Law.
5.03 Governmental Authorization. No approval, consent,
exemption, authorization, or other action by, or notice to, or
filing with, any Governmental Authority is necessary or required
in connection with the execution, delivery or performance by, or
enforcement against, the Company of the Agreement or any other
Loan Document.
5.04 Binding Effect. This Agreement and each other Loan
Document to which the Company is a party constitute the legal,
valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement
of creditors' rights generally or by equitable principles
relating to enforceability.
5.05 Litigation. There are no actions, suits, proceedings,
claims or disputes pending, or to the best knowledge of the
Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the
Company or its Subsidiaries or any of their respective
properties which:
(a) purport to affect or pertain to this Agreement or
any other Loan Document, or any of the transactions contemplated
hereby or thereby; or
(b) if determined adversely to the Company or its
Subsidiaries, would reasonably be expected to have a Material
Adverse Effect. No injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or
other Governmental Authority purporting to enjoin or restrain
the execution, delivery or performance of this Agreement or any
other Loan Document, or directing that the transactions provided
for herein or therein not be consummated as herein or therein
provided.
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5.06 No Default No Default or Event of Default exists or
would result from the incurring of any Obligations by the
Company. As of the Closing Date, neither the Company nor any
Subsidiary is in default under or with respect to any
Contractual Obligation in any respect which, individually or
together with all such defaults, could reasonably be expected to
have a Material Adverse Effect, or that would, if such default
had occurred after the Closing Date, create an Event of Default
under subsection 8.01(e).
5.07 ERISA Compliance.
(a) Except as specifically disclosed on Schedule 5.07,
each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or
state law. Each Plan which is intended to qualify under Section
401(a) of the Code has received a favorable determination letter
from the IRS and to the best knowledge of the Company, nothing
has occurred which would cause the loss of such qualification.
The Company and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any
amortization period pursuant to Section 412 of the Code has been
made with respect to any Plan.
(b) There are no pending or, to the best knowledge of
Company, threatened claims, actions or lawsuits, or action by
any Governmental Authority, with respect to any Plan which has
resulted or could reasonably be expected to result in a Material
Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(c) (i) No ERISA Event has occurred or is reasonably
expected to occur; (ii) except as specifically disclosed on
Schedule 5.07, no Pension Plan has any Unfunded Pension
Liability; (iii) neither the Company nor any ERISA Affiliate has
incurred, or reasonably expects to incur, any liability under
Title IV of ERISA with respect to any Pension Plan (other than
premiums due and not delinquent under Section 4007 of ERISA);
(iv) neither the Company nor any ERISA Affiliate has incurred,
or reasonably expects to incur, any liability (and no event has
occurred which, with the giving of notice under Section 4219 of
ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v)
neither the Company nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of
ERISA.
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5.08 Use of Proceeds; Margin Regulations. The proceeds of
the Loans are to be used solely for the purposes set forth in
and permitted by Section 6.12 and Section 7.07. Neither the
Company nor any Subsidiary is generally engaged in the business
of purchasing or selling Margin Stock or extending credit for
the purpose of purchasing or carrying Margin Stock.
5.09 Title to Properties. The Company and each Subsidiary
have good record and marketable title in fee simple to, or valid
leasehold interests in, all real property necessary or used in
the ordinary conduct of their respective businesses, except for
such defects in title as could not, individually or in the
aggregate, have a Material Adverse Effect. As of the Closing
Date, the property of the Company and its Subsidiaries is
subject to no Liens, other than Permitted Liens.
5.10 Taxes. The Company and its Subsidiaries have filed
all Federal and other material tax returns and reports required
to be filed, and have paid all Federal and other material taxes,
assessments, fees and other governmental charges levied or
imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being
contested in good faith by appropriate proceedings and for which
adequate reserves have been provided in accordance with GAAP.
There is no proposed tax assessment against the Company or any
Subsidiary that would, if made, have a Material Adverse Effect.
5.11 Financial Condition. (a) The audited consolidated
financial statements of the Company and its Subsidiaries as at
April 2, 1995 and the related consolidated statements of income
or operations, shareholders' equity and cash flows for the
fiscal year ended on that date:
(i) were prepared in accordance with GAAP
consistently applied throughout the period covered thereby,
except as otherwise expressly noted therein;
(ii) fairly present the financial condition of
the Company and its Subsidiaries as of the date thereof and
results of operations for the period covered thereby; and
(iii) except as specifically disclosed in
Schedule 5.11, show all material indebtedness and other
liabilities, direct or contingent, of the Company and its
consolidated Subsidiaries as of the date thereof, including
liabilities for taxes, material commitments and Contingent
Obligations.
(b) Since April 2, 1995, there has been no Material
Adverse Effect.
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5.12 Environmental Matters. The Company conducts in the
ordinary course of business a review of the effect of existing
Environmental Laws and existing Environmental Claims on its
business, operations and properties, and as a result thereof the
Company has reasonably concluded that, except as specifically
disclosed in Schedule 5.12, such Environmental Laws and
Environmental Claims would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
5.13 Regulated Entities. None of the Company, any Person
controlling the Company, or any Subsidiary is an "Investment
Company" within the meaning of the Investment Company Act of
1940. The Company is not subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its
ability to incur Indebtedness.
5.14 No Burdensome Restrictions; No Restrictions on
Subsidiary Dividends. Neither the Company nor any Subsidiary is
a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document or any Requirement
of Law, which could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary is a
party to or bound by any Contractual Obligation which restricts,
limits or prohibits the payment of dividends by any Subsidiary
or the making of any other distribution in respect of such
Subsidiary's capital stock.
5.15 Copyrights, Patents, Trademarks and Licenses, etc. The
Company or its Subsidiaries own or are licensed or otherwise
have the right to use all of the material patents, trademarks,
service marks, trade names, copyrights, contractual franchises,
authorizations and other rights that are reasonably necessary
for the operation of their respective businesses, without
conflict with the rights of any other Person. To the best
knowledge of the Company, no slogan or other advertising device,
product, process, method, substance, part or other material now
employed, or now contemplated to be employed, by the Company or
any Subsidiary infringes upon any rights held by any other
Person. Except as specifically disclosed in Schedule 5.15, no
claim or litigation regarding any of the foregoing is pending or
threatened, and no patent, invention, device, application,
principle or any statute, law, rule, regulation, standard or
code is pending or, to the knowledge of the Company, proposed,
which, in either case, could reasonably be expected to have a
Material Adverse Effect.
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5.16 Subsidiaries. The Company has no Subsidiaries other
than those specifically disclosed in part (a) of Schedule 5.16
hereto and has no equity investments in any other corporation or
entity other than those specifically disclosed in part (b) of
Schedule 5.16, except in each case for Subsidiaries acquired in
Approved Acquisitions or other equity investments not prohibited
by this Agreement. As of the Closing Date, the Company has no
Material Subsidiaries other than those specifically disclosed in
part (c) of Schedule 5.16.
5.17 Insurance. Except as specifically disclosed in
Schedule 5.17, the properties of the Company and its
Subsidiaries are insured with financially sound and reputable
insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are
customarily carried by companies engaged in similar businesses
and owning similar properties in localities where the Company or
such Subsidiary operates.
5.18 Swap Obligations. Neither the Company nor any of its
Subsidiaries has incurred any outstanding obligations under any
Swap Contracts, other than Permitted Swap Obligations. The
Company has undertaken its own independent assessment of its
consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks
associated with such matters and has not relied on any swap
counterparty or any Affiliate of any swap counterparty in
determining whether to enter into any Swap Contract.
5.19 Full Disclosure. None of the representations or
warranties made by the Company or any Subsidiary in the Loan
Documents as of the date such representations and warranties are
made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on
behalf of the Company or any Subsidiary in connection with the
Loan Documents (including the offering and disclosure materials
delivered by or on behalf of the Company to the Banks prior to
the Closing Date), contains any untrue statement of a material
fact or omits any material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of
the time when made or delivered.
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Required Banks waive compliance in writing:
6.01 Financial Statements. The Company shall deliver to
the Agent, in form and detail satisfactory to the Agent and the
Required Banks, with sufficient copies for each Bank:
(a) as soon as available, but not later than 100
days after the end of each fiscal year, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries
as at the end of such year and the related consolidated
statements of income or operations, shareholders' equity and
cash flows for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, and
accompanied by the unqualified opinion of Price Waterhouse
L.L.P. or another nationally-recognized independent public
accounting firm ("Independent Auditor") which report shall state
that such consolidated financial statements present fairly the
financial position for the periods indicated in conformity with
GAAP applied on a basis consistent with prior years. Such
opinion shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of
any material portion of the Company's or any Subsidiary's
records;
(b) as soon as available, but not later than 55 days
after the end of each fiscal quarter of each fiscal year
(commencing with the fiscal quarter ended December 31, 1995), a
copy of the unaudited consolidated balance sheet of the Company
and its Subsidiaries as of the end of such quarter and the
related consolidated statements of income, shareholders' equity
and cash flows for the period commencing on the first day and
ending on the last day of such quarter, and certified by a
Responsible Officer as fairly presenting, in accordance with
GAAP (subject to ordinary, good faith year-end audit adjustments
and the absence of footnotes), the financial position and the
results of operations of the Company and the Subsidiaries;
6.02 Certificates; Other Information. The Company shall
furnish to the Agent, with sufficient copies for each Bank:
(a) as soon as available and in any event within 55
days after the end of each fiscal quarter, a Compliance
Certificate executed by a Responsible Officer;
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(b) promptly, copies of all financial statements and
reports that the Company sends to its shareholders, and copies
of all financial statements and regular, periodical or special
reports (including Forms 10K, 10Q and 8K) that the Company or
any Subsidiary may make to, or file with, the SEC; and
(c) promptly, such additional information regarding
the business, financial or corporate affairs of the Company or
any Subsidiary as the Agent, at the request of any Bank, may
from time to time reasonably request.
6.03 Notices. The Company shall promptly notify the Agent
and each Bank:
(a) but in no event more than 10 days after the
occurrence or existence thereof, of the occurrence of any
Default or Event of Default, and of the occurrence or existence
of any event or circumstance that foreseeably will become a
Default or Event of Default;
(b) but in no event more than 10 days after the
occurrence thereof, of any matter that has resulted or may
reasonably be expected to result in a Material Adverse Effect,
including (i) breach or non-performance of, or any default
under, a Contractual Obligation of the Company or any
Subsidiary; (ii) any dispute, litigation, investigation,
proceeding or suspension between the Company or any Subsidiary
and any Governmental Authority; or (iii) the commencement of, or
any material development in, any litigation or proceeding
affecting the Company or any Subsidiary, including pursuant to
any applicable Environmental Laws;
(c) of the occurrence of any of the following events
affecting the Company or any ERISA Affiliate (but in no event
more than 10 days after such event), and deliver to the Agent
and each Bank a copy of any notice with respect to such event
that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any
ERISA Affiliate with respect to such event:
(i) an ERISA Event;
(ii) a material increase in the Unfunded Pension
Liability of any Pension Plan;
(iii) the adoption of, or the commencement of
contributions to, any Plan subject to Section 412 of the
Code by the Company or any ERISA Affiliate; or
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(iv) the adoption of any amendment to a Plan
subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded
Pension Liabilty; and
(d) of any material change in accounting policies or
financial reporting practices by the Company or any of its
consolidated Subsidiaries, including any change in GAAP that
will have an effect on Consolidated Net Worth;
Each notice under this Section shall be accompanied by
a written statement by a Responsible Officer setting forth
details of the occurrence referred to therein, and stating what
action the Company or any affected Subsidiary proposes to take
with respect thereto and at what time. Each notice under
subsection 6.03(a) shall describe with particularity any and all
clauses or provisions of this Agreement or other Loan Document
that have been (or foreseeably will be) breached or violated.
6.04 Preservation of Corporate Existence, Etc. The Company
shall, and shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its
corporate existence and good standing under the laws of its
state or jurisdiction of incorporation;
(b) preserve and maintain in full force and effect all
governmental rights, privileges, qualifications, permits,
licenses and franchises necessary or desirable in the normal
conduct of its business, the non-preservation or maintenance of
which could reasonably be expected to have a Material Adverse
Effect, except in connection with transactions permitted by
Section 7.03 and sales of assets permitted by Section 7.02;
(c) use reasonable efforts, in the ordinary course of
business, to preserve its business organization and goodwill;
and
(d) preserve or renew all of its registered patents,
trademarks, trade names and service marks, the non-preservation
of which could reasonably be expected to have a Material Adverse
Effect.
6.05 Maintenance of Property. Except as permitted by
Section 7.02, the Company shall maintain, and shall cause each
Subsidiary to maintain, and preserve all its property which is
used or useful in its business in good working order and
condition, ordinary wear and tear excepted and make all
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necessary repairs thereto and renewals and replacements thereof
except where the failure to do so could not reasonably be
expected to have a Material Adverse Effect. The Company and
each Subsidiary shall use the standard of care typical in the
industry in the operation and maintenance of its facilities.
6.06 Insurance. The Company shall maintain, and shall
cause each Subsidiary to maintain, with financially sound and
reputable independent insurers, insurance with respect to its
properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or
similar business, of such types and in such amounts as are
customarily carried under similar circumstances by such other
Persons.
6.07 Payment of Obligations. The Company shall, and shall
cause each Subsidiary to, pay and discharge as the same shall
become due and payable all their respective obligations and
liabilities, including:
(a) all tax liabilities, assessments and governmental
charges or levies upon it or its properties or assets, unless
the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are
being maintained by the Company or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law
become a Lien upon its property; and
(c) all indebtedness, as and when due and payable, but
subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
6.08 Compliance with Laws. The Company shall comply, and
shall cause each Subsidiary to comply, in all material respects
with all Requirements of Law of any Governmental Authority
having jurisdiction over it or its business (including the
Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may
exist.
6.09 Compliance with ERISA. The Company shall, and shall
cause each of its ERISA Affiliates to: (a) maintain each Plan
in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law;
(b) cause each Plan which is qualified under Section 401(a) of
the Code to maintain such qualification; and (c) make all
required contributions to any Plan subject to Section 412 of the
Code.
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6.10 Inspection of Property and Books and Records. The
Company shall maintain and shall cause each Subsidiary to
maintain proper books of record and account, in which full, true
and correct entries in conformity with GAAP consistently applied
shall be made of all financial transactions and matters
involving the assets and business of the Company and such
Subsidiary. The Company shall permit, and shall cause each
Subsidiary to permit, representatives and independent
contractors of the Agent or any Bank to visit and inspect any of
their respective properties, to examine their respective
corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective directors,
officers, and independent public accountants, all at such
reasonable times during normal business hours and as often as
may be reasonably desired, upon reasonable advance notice to the
Company; provided, however, when an Event of Default exists the
Agent or any Bank may do any of the foregoing at the expense of
the Company at any time during normal business hours and without
advance notice.
6.11 Environmental Laws. The Company shall, and shall
cause each Subsidiary to, conduct its operations and keep and
maintain its property in material compliance with all
Environmental Laws, except such as may be contested in good
faith or as to which a bona fide dispute may exist and adequate
reserves are being maintained with respect thereto in accordance
with GAAP.
6.12 Use of Proceeds. The Company shall use the proceeds of
the Loans for working capital and other general corporate
purposes including for purposes of undertaking Approved
Acquisitions not in contravention of any provision of this
Agreement or of any other Loan Document.
6.13 Internal Controls. The Company shall maintain
reasonable internal controls and reporting systems designed to
insure that the executive officers of the Company and any
employee of the Company with management responsibility for the
subject matter as to which the Company's knowledge is relevant
will be promptly informed of all material financial, operational
and compliance matters relevant to compliance with the
provisions of this Agreement.
6.14 New Material Subsidiaries. The Company shall notify
the Agent, which shall notify each Bank, promptly after the date
any Subsidiary of the Company becomes a Material Subsidiary or
the Company acquires a Subsidiary which is a Material
Subsidiary, of such occurrence and promptly after such date and,
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in any event, within five Business Days following receipt by the
Company from the Agent of a guaranty of the Obligations in
substantially the form of the Subsidiary Guaranty, shall cause
such Material Subsidiary to execute and deliver such guaranty to
the Agent. Within 30 days after the request therefor by the
Agent, at the request of any Bank, the Company and such Material
Subsidiary shall execute and deliver to the Agent such other
items as reasonably requested by the Agent, at the request of
any Bank, in connection with the foregoing, including
resolutions, incumbency certificates, officer's certificates and
opinions of counsel.
ARTICLE VII
NEGATIVE COVENANTS
So long as any Bank shall have any Commitment hereunder, or
any Loan or other Obligation shall remain unpaid or unsatisfied,
unless the Required Banks waive compliance in writing:
7.01 Limitation on Liens. The Company shall not, and shall
not suffer or permit any Subsidiary to, directly or indirectly,
make, create, incur, assume or suffer to exist any Lien upon or
with respect to any part of its property, whether now owned or
hereafter acquired, other than the following ("Permitted
Liens"):
(a) any Lien existing on property of the Company or
any Subsidiary on the Closing Date and set forth in Schedule
7.01 securing Indebtedness outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other
governmental charges which are not delinquent or remain payable
without penalty, or to the extent that non-payment thereof is
permitted by Section 6.07, provided that no notice of lien has
been filed or recorded under the Code;
(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the
ordinary course of business which are not delinquent or remain
payable without penalty or which are being contested in good
faith and by appropriate proceedings, which proceedings have the
effect of preventing the forfeiture or sale of the property
subject thereto;
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(e) Liens (other than any Lien imposed by ERISA)
consisting of pledges or deposits required in the ordinary
course of business in connection with workers' compensation,
unemployment insurance and other social security legislation;
(f) Liens on the property of the Company or its
Subsidiary securing (i) the non-delinquent performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a
like nature; in each case, incurred in the ordinary course of
business, provided all such Liens in the aggregate would not
(even if enforced) cause a Material Adverse Effect;
(g) Liens consisting of judgment or judicial
attachment liens, provided that the enforcement of such Liens is
effectively stayed and all such liens in the aggregate at any
time outstanding for the Company and its Subsidiaries do not
exceed $5,000,000;
(h) easements, rights-of-way, restrictions and other
similar encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of
the property subject thereto or interfere with the ordinary
conduct of the businesses of the Company and its Subsidiaries;
(i) Liens on assets or the assets of Persons acquired
by the Company or a Subsidiary in Approved Acquisitions,
provided, however, that such Liens existed at the time the
respective assets or Persons were acquired and were not created
in anticipation thereof;
(j) purchase money security interests on any property
acquired or held by the Company or its Subsidiaries in the
ordinary course of business, securing Indebtedness incurred or
assumed for the purpose of financing all or any part of the cost
of acquiring such property; provided that (i) any such Lien
attaches to such property concurrently with or within 20 days
after the acquisition thereof, (ii) such Lien attaches solely to
the property (including proceeds thereof) so acquired in such
transaction, and (iii) the principal amount of the debt secured
thereby does not exceed 100% of the cost of such property;
(k) Liens securing obligations in respect of capital
leases on assets subject to such leases, provided that such
capital leases are otherwise permitted hereunder;
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(l) Liens arising solely by virtue of any statutory or
common law provision relating to banker's liens, rights of set-
off or similar rights and remedies as to deposit accounts or
other funds maintained with a creditor depository institution;
provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by
regulations promulgated by the FRB, and (ii) such deposit
account is not intended by the Company or any Subsidiary to
provide collateral to the depository institution; and
(m) any other Liens if the aggregate amount of
obligations of the Company or any of its Subsidiaries that is
secured by such Liens does not exceed $10,000,000 in the
aggregate at any time.
7.02 Disposition of Assets. The Company shall not, and
shall not suffer or permit any Subsidiary to, directly or
indirectly, sell, assign, lease, convey, transfer or otherwise
dispose of (whether in one or a series of transactions) any
property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the
foregoing, except:
(a) dispositions of inventory or used, worn-out,
obsolete or surplus equipment, all in the ordinary course of
business;
(b) the sale of equipment to the extent that such
equipment is exchanged for credit against the purchase price of
similar replacement equipment, or the proceeds of such sale are
reasonably promptly applied to the purchase price of such
replacement equipment;
(c) dispositions by the Company of divisions or
Subsidiaries, dispositions by Subsidiaries of divisions, and
dispositions of the assets of divisions of the Company or any
Subsidiary, in aggregate amount not to exceed (i) $15,000,000 in
any one year and (ii) on a cumulative basis from and after the
Closing Date, 10% of Consolidated Total Assets as of the end of
the fiscal quarter immediately preceding the date of
determination; and
(d) sales or transfers permitted by Section 7.03.
7.03 Consolidations and Mergers. The Company shall not,
and shall not suffer or permit any Subsidiary to, merge,
consolidate with or into, or convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series
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of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to or in favor of any Person,
except:
(a) any Subsidiary may merge with the Company,
provided that the Company shall be the continuing or surviving
corporation, or with any one or more Subsidiaries, provided that
if any transaction shall be between a Subsidiary and a
Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation;
(b) any Subsidiary may sell all or substantially all
of its assets (upon voluntary liquidation or otherwise), to the
Company or another Wholly-Owned Subsidiary;
(c) the Company or any Subsidiary may merge with any
Person in an Approved Acquisition so long as (i) the Company or
such Subsidiary shall be the continuing or surviving corporation
or (ii) in the case of a merger with a Subsidiary, the acquired
Person is, as a result of the merger transaction, a Wholly-Owned
Subsidiary of the Company; and
(d) the Company may (i) transfer the operating assets
of its structurals division to a Wholly-Owned Subsidiary or (ii)
engage in an internal reorganization transaction, whether
involving a share exchange, merger, share dividend or otherwise,
resulting in a holding company structure in which the Company's
structurals division and each of the Wholly-Owned Subsidiaries
are Subsidiaries of the holding company, and whereby the holding
company assumes all obligations of the Company under this
Agreement pursuant to an assumption agreement in form and
substance acceptable to the Majority Banks; provided, that in
the case of clause (i) and (ii), immediately prior to and after
giving effect to the proposed transaction, there shall be no
Default or Event of Default, and, in the case of clause (ii),
the Agent and the Banks shall have received one or more
guarantees, substantially in the form of the Subsidiary
Guaranty, of the obligations of the holding company hereunder
from any Person which, after giving effect to the proposed
transaction, would be a Material Subsidiary of the holding
company, along with such other certificates, documents, and
opinions related to the proposed transaction, the assumption of
the Company's obligations hereunder by the holding company and
such guarantees, as the Agent or any Bank may reasonably
request.
7.04 Loans and Investments. (a) The Company shall not
purchase or acquire, or suffer or permit any Subsidiary to
purchase or acquire, or make any commitment therefor, any
capital stock, equity interest, or any obligations or other
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securities of, or any interest in, any Person, or make or commit
to make any Acquisitions, or make or commit to make any advance,
loan, extension of credit or capital contribution to or any
other investment in, any Person including any Affiliate of the
Company (together, "Investments"), except for:
(i) Approved Acquisitions; provided, that the Company
has complied with the provisions of this Section 7.04 with
respect to such Approved Acquisitions; and provided, further
that, immediately before and after giving effect thereto, no
Default or Event of Default shall have occurred and be
continuing;
(ii) Investments held by the Company or Subsidiary in
the form of cash equivalents or short term marketable
securities;
(iii) extensions of credit in the nature of accounts
receivable or notes receivable arising from the sale or lease of
goods or services in the ordinary course of business;
(iv) extensions of credit by the Company to any of its
Wholly-Owned Subsidiaries or by any of its Wholly-Owned
Subsidiaries to another of its Wholly-Owned Subsidiaries; and
(v) Investments constituting Permitted Swap
Obligations or payments or advances under Swap Contracts
relating to Permitted Swap Obligations.
(b) (i) If the Company or any Subsidiary wishes to
make any Acquisition, the Company shall deliver to the Agent a
written notice thereof, containing a description in detail
reasonably satisfactory to the Agent of the businesses,
divisions, Persons or assets proposed to be acquired and the
terms and conditions of such proposed Acquisition. Such notice
must also include a summary calculation of the EBITDA of or with
respect to such Person or assets proposed to be acquired for
each of the four consecutive fiscal quarters ending on the last
day of the immediately preceding quarter, and pro forma
consolidated and consolidating financial statements for such
period calculated after giving effect to such proposed
Acquisition, and must be delivered not less than 30 days prior
to the desired closing date of such Acquisition in the case of a
Major Acquisition, or within 10 days before the closing date in
the case of any other Acquisition. The Company shall also
deliver to the Agent such financial statements and appraisals
for the Persons, businesses, divisions or other assets which the
Company proposes to acquire as may be reasonably requested by
the Agent. Such notice shall be accompanied by (A) pro forma
financial statements of the Company prepared by the Company
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demonstrating that such Acquisition will comply with the
requirements of clause (iv) of the definition of Approved
Acquisition, and (B) a certificate of a Responsible Officer of
the Company certifying that (subject to any necessary approvals
of the Banks) such Acquisition will be an Approved Acquisition.
(ii) The Agent will promptly deliver copies of all
materials which it receives from the Company pursuant to this
Section 7.04 to the Banks and, to the extent that the approval
of the Banks is required hereunder, the Banks shall notify the
Agent, which shall in turn promptly notify the Company, of their
approval or disapproval of the proposed Acquisition within 10
days of each Bank's receipt of the materials from the Agent;
provided, that the failure of any Bank to so notify the Agent
within such 10-day period shall be deemed to be a notice of
disapproval.
7.05 Limitation on Subsidiary Indebtedness. The Company
shall not suffer or permit any Subsidiary to, create, incur,
assume, suffer to exist, or otherwise become or remain directly
or indirectly liable with respect to, any Indebtedness, except:
(a) Indebtedness consisting of Contingent Obligations
permitted pursuant to Section 7.08;
(b) Indebtedness existing on the Closing Date and set
forth in Schedule 7.05;
(c) Indebtedness existing on or arising after the
Closing Date and not set forth on Schedule 7.05 in an aggregate
amount not to exceed $25,000,000 at any time outstanding;
(d) Indebtedness secured by Liens permitted by
subsection 7.01(i) and (j); and
(e) Indebtedness of a Subsidiary acquired in an
Approved Acquisition in existence on the date of such
acquisition and not incurred or created in contemplation
thereof.
7.06 Transactions with Affiliates. The Company shall not,
and shall not suffer or permit any Subsidiary to, enter into any
transaction with any Affiliate of the Company, except in the
ordinary course of business upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person
not an Affiliate of the Company or such Subsidiary.
7.07 Use of Proceeds. (a) The Company shall not, and
shall not suffer or permit any Subsidiary to, use any portion of
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the Loan proceeds, directly or indirectly, (i) to purchase or
carry Margin Stock in violation of, or for a purpose which
violates, or would be inconsistent with, Regulation G, T, U or X
of the FRB, (ii) to repay or otherwise refinance indebtedness of
the Company or others incurred to purchase or carry Margin
Stock, (iii) to extend credit for the purpose of purchasing or
carrying any Margin Stock, or (iv) to finance an Acquisition
which is contested at any time by the board of directors or
equivalent governing body of the acquired Person or the Person
from whom the Acquisition is to be made (an "Unfriendly
Acquisition") or for a bid to make an Unfriendly Acquisition.
(b) The Company shall not, directly or indirectly, use
any portion of the Loan proceeds (i) knowingly to purchase
Ineligible Securities from the Arranger during any period in
which the Arranger makes a market in such Ineligible Securities,
(ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately
placed by the Arranger, or (iii) to make payments of principal
or interest on Ineligible Securities underwritten or privately
placed by the Arranger and issued by or for the benefit of the
Company or any Affiliate of the Company. The Arranger is a
registered broker-dealer and permitted to underwrite and deal in
certain Ineligible Securities; and "Ineligible Securities" means
securities which may not be underwritten or dealt in by member
banks of the Federal Reserve System under Section 16 of the
Banking Act of 1933 (12 U.S.C. 24, Seventh), as amended.
7.08 Contingent Obligations. The Company shall not, and
shall not suffer or permit any Subsidiary to, create, incur,
assume or suffer to exist any Contingent Obligations except:
(a) endorsements for collection or deposit in the
ordinary course of business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its
Subsidiaries existing as of the Closing Date and listed in
Schedule 7.08;
(d) Contingent Obligations with respect to Surety
Instruments incurred in the ordinary course of business and not
exceeding at any time $15,000,000 in the aggregate in respect of
the Company and its Subsidiaries together; and
(e) unsecured Guaranty Obligations of the Material
Subsidiaries to The Prudential Insurance Company of America
("Prudential") with respect to Indebtedness of the Company to
Prudential not exceeding the principal amount of $6,000,000
outstanding at any one time.
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7.09 Joint Ventures. The Company shall not, and shall not
suffer or permit any Subsidiary to enter into any Joint Venture,
other than in the ordinary course of business.
7.10 ERISA. The Company shall not, and shall not suffer or
permit any of its ERISA Affiliates to: (a) engage in a
prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted
or could reasonably expected to result in liability of the
Company in an aggregate amount in excess of $5,000,000; or (b)
engage in a transaction that could be subject to Section 4069 or
4212(c) of ERISA.
7.11 Change in Business. The Company shall not, and shall
not suffer or permit any Subsidiary to, engage in any material
line of business substantially different from the Existing Lines
of Business,
7.12 Accounting Changes. The Company shall not, and shall
not suffer or permit any Subsidiary to, make any significant
change in accounting treatment or reporting practices, except as
required by GAAP, or change the fiscal year of the Company or of
any Subsidiary; provided, that the Company may permit any
Subsidiary to, and any Subsidiary may, change such Subsidiary's
fiscal year to conform to the fiscal year of the Company.
7.13 Minimum Consolidated Net Worth. The Company shall not
permit its Consolidated Net Worth as of the last day of any
fiscal quarter (commencing with the quarter ended December 31,
1995) to be less than (a) $280,000,000 plus (b) 50% of
Consolidated Net Income (without giving effect to any net loss
for any period) from and after December 31, 1995, plus (c) 50%
of all Net Issuance Proceeds from and after the Closing Date,
less (d) any reduction in shareholder's equity directly
resulting from the repurchase by the Company from and after the
Closing Date of its capital stock in an amount not to exceed
$50,000,000.
7.14 Interest Coverage Ratio. The Company shall not permit
its Interest Coverage Ratio as determined as of the last day of
any fiscal quarter (commencing with the quarter ended December
31, 1995), calculated on a four quarter rolling basis for such
fiscal quarter and the three immediately preceding fiscal
quarters, to be less than 3.50 to 1.00.
7.15 Leverage Ratio. The Company shall not permit its
Leverage Ratio as determined as of the last day of any fiscal
quarter (commencing with the quarter ended December 31, 1995) to
be greater than 3.30 to 1.00. For purposes of calculation of
the Leverage Ratio, EBITDA shall be calculated on a four quarter
rolling basis for such fiscal quarter and the three immediately
preceding fiscal quarters.
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7.16 No Restrictions on Subsidiary Dividends. The
Company shall not, and shall not suffer or permit any Subsidiary
to, enter into or be bound by any Contractual Obligation which
restricts, limits or prohibits the payment of dividends by any
Subsidiary or the making of any other distribution in respect of
such Subsidiary's capital stock.
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Event of Default. Any of the following shall
constitute an "Event of Default":
(a) Non-Payment. The Company fails to pay, (i) when
and as required to be paid herein, any amount of principal of
any Loan or any amount of interest on any Bid Loan, or (ii)
within five days after the same becomes due, any interest, fee
or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or
warranty by the Company or any Subsidiary made or deemed made
herein, in any other Loan Document, or which is contained in any
certificate, document or financial or other statement by the
Company, any Subsidiary, or any Responsible Officer, furnished
at any time under this Agreement, or in or under any other Loan
Document, is incorrect in any material respect on or as of the
date made or deemed made; or
(c) Specific Defaults. The Company fails to perform
or observe any term, covenant or agreement contained in any of
Section 6.01, 6.02(a), 6.03 or in Article VII; or
(d) Other Defaults. The Company fails to perform or
observe any other term or covenant contained in this Agreement
or any other Loan Document, and such default shall continue
unremedied for a period of 30 days after the earlier of (i) the
date upon which a Responsible Officer knew or reasonably should
have known of such failure or (ii) the date upon which written
notice thereof is given to the Company by the Agent or any Bank;
or
(e) Cross-Default. (i) The Company or any Subsidiary
(A) fails to make any payment in respect of any Indebtedness or
Contingent Obligation (other than in respect of Swap Contracts),
having an aggregate principal amount (including undrawn
committed or available amounts and including amounts owing to
all creditors under any combined or syndicated credit
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arrangement) of more than $5,000,000, when due (whether by
scheduled maturity, required prepayment, acceleration, demand,
or otherwise); or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or
condition exist, under any agreement or instrument relating to
any such Indebtedness or Contingent Obligation, if the effect of
such failure, event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on
behalf of such holder or holders or beneficiary or
beneficiaries) to cause such Indebtedness to be declared to be
due and payable prior to its stated maturity, or such Contingent
Obligation to become payable or cash collateral in respect
thereof to be demanded; or (ii) there occurs under any Swap
Contract an Early Termination Date resulting from (1) any event
of default under such Swap Contract as to which the Company or
any Subsidiary is the Defaulting Party or (2) any Termination
Event as to which the Company or any Subsidiary is an Affected
Party, and, in either event, the Swap Termination Value owed by
the Company or such Subsidiary as a result thereof is greater
than $5,000,000; for purposes of this subsection (e), the terms
"Early Termination Date", "Defaulting Party", "Termination
Event", and "Affected Party" shall have the meanings assigned to
them in the relevant Swap Contract, it being understood that
such definitions contemplate Swap Contracts documented on
International Swaps and Derivatives Association ("ISDA")
standard forms; if such Swap Contract is not documented on an
ISDA standard form, such terms shall be given similar or
analogous meanings as used in such non-ISDA standard agreements;
or
(f) Insolvency; Voluntary Proceedings. The Company or
any Material Subsidiary (i) ceases or fails to be solvent, or
generally fails to pay, or admits in writing its inability to
pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (ii)
voluntarily ceases to conduct its business in the ordinary
course; (iii) commences any Insolvency Proceeding with respect
to itself; or (iv) takes any action to effectuate or authorize
any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Company
or any Material Subsidiary, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied
against a substantial part of the Company's or any Material
Subsidiary's properties, and any such proceeding or petition
shall not be dismissed, or such writ, judgment, warrant of
attachment, execution or similar process shall not be released,
vacated or fully bonded within 60 days after commencement,
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filing or levy; (ii) the Company or any Material Subsidiary
admits the material allegations of a petition against it in any
Insolvency Proceeding, or an order for relief (or similar order
under non-U.S. law) is ordered in any Insolvency Proceeding; or
(iii) the Company or any Material Subsidiary acquiesces in the
appointment of a receiver, trustee, custodian, conservator,
liquidator, mortgagee in possession (or agent therefor), or
other similar Person for itself or a substantial portion of its
property or business; or
(h) ERISA. (i) An ERISA Event shall occur with
respect to a Pension Plan or Multiemployer Plan which has
resulted or could reasonably be expected to result in liability
of the Company under Title IV of ERISA to the Pension Plan,
Multiemployer Plan or the PBGC in an aggregate amount in excess
of $5,000,000; (ii) the aggregate amount of Unfunded Pension
Liability among all Pension Plans at any time exceeds
$15,000,000; or (iii) the Company or any ERISA Affiliate shall
fail to pay when due, after the expiration of any applicable
grace period, any installment payment with respect to its
withdrawal liability under Section 4201 of ERISA under a
Multiemployer Plan in an aggregate amount in excess of
$5,000,000;
(i) Monetary Judgments. One or more non-interlocutory
judgments, non-interlocutory orders, decrees or arbitration
awards is entered against the Company or any Subsidiary
involving in the aggregate a liability (to the extent not
covered by independent third-party insurance as to which the
insurer does not dispute coverage) as to any single or related
series of transactions, incidents or conditions, of more than
$5,000,000, and the same shall remain unvacated and unstayed
pending appeal for a period of 10 days after the entry thereof;
or
(j) Non-Monetary Judgments. Any non-monetary
judgment, order or decree is entered against the Company or any
Subsidiary which does or would reasonably be expected to have a
Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(k) Change of Control. (i) Any Person or two or more
Persons acting in concert acquires beneficial ownership (within
the meaning of Rule 13d-3 of the SEC under the Exchange Act),
directly or indirectly, of securities of the Company (or other
securities convertible into such securities) representing 25% or
more of the combined voting power of all securities of the
Company entitled to vote in the election of directors; or
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(ii) during any period of up to 12 consecutive months,
individuals who at the beginning of such 12-month period were
directors of the Company ceasing for any reason to constitute a
majority of the Board of Directors of the Company unless the
Persons replacing such individuals were nominated by the Board
of Directors of the Company; or (iii) any Person or two or more
Persons acting in concert acquiring by contract or otherwise, or
entering into a contract or arrangement which upon consummation
will result in its or their acquisition of, or control over,
securities of the Company (or other securities convertible into
such securities) representing 25% or more of the combined voting
power of all securities of the Company entitled to vote in the
election of directors;
(l) Guarantor Defaults. Any Material Subsidiary party
to a Subsidiary Guaranty fails in any material respect to
perform or observe any term, covenant or agreement in the
Subsidiary Guaranty to which it is a party; or such Subsidiary
Guaranty is for any reason partially (including with respect to
future advances) or wholly revoked or invalidated, or otherwise
ceases to be in full force and effect, or such Material
Subsidiary or any other Person contests in any manner the
validity or enforceability thereof or denies that it has any
further liability or obligation thereunder; or
(m) Adverse Change. There occurs a Material Adverse
Effect.
8.02 Remedies. If any Event of Default occurs, the Agent
shall, at the request of, or may, with the consent of, the
Required Banks,
(a) declare the commitment of each Bank to make
Committed Loans to be terminated, whereupon such commitments
shall be terminated;
(b) declare the unpaid principal amount of all
outstanding Loans, all interest accrued and unpaid thereon, and
all other amounts owing or payable hereunder or under any other
Loan Document to be immediately due and payable, without
presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived by the Company; and
(c) exercise on behalf of itself and the Banks all
rights and remedies available to it and the Banks under the Loan
Documents or applicable law;
provided, however, that upon the occurrence of any event
specified in subsection (f) or (g) of Section 8.01 (in the case
of clause (i) of subsection (g) upon the expiration of the 60-
day period mentioned therein), the obligation of each Bank to
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make Loans shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and
other amounts as aforesaid shall automatically become due and
payable without further act of the Agent or any Bank.
8.03 Rights Not Exclusive. The rights provided for in this
Agreement and the other Loan Documents are cumulative and are
not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter
arising.
ARTICLE IX
THE AGENT
9.01 Appointment and Authorization; "Agent". Each Bank
hereby irrevocably (subject to Section 9.09) appoints,
designates and authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such
duties as are expressly delegated to it by the terms of this
Agreement or any other Loan Document, together with such powers
as are reasonably incidental thereto. Notwithstanding any
provision to the contrary contained elsewhere in this Agreement
or in any other Loan Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth
herein, nor shall the Agent have or be deemed to have any
fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent. Without limiting the
generality of the foregoing sentence, the use of the term
"agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative
relationship between independent contracting parties.
9.02 Delegation of Duties. The Agent may execute any of
its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining
to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that
it selects with reasonable care.
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9.03 Liability of Agent. None of the Agent-Related Persons
shall (i) be liable for any action taken or omitted to be taken
by any of them under or in connection with this Agreement or any
other Loan Document or the transactions contemplated hereby
(except for its own gross negligence or willful misconduct), or
(ii) be responsible in any manner to any of the Banks for any
recital, statement, representation or warranty made by the
Company or any Subsidiary or Affiliate of the Company, or any
officer thereof, contained in this Agreement or in any other
Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other
Loan Document, or for any failure of the Company or any other
party to any Loan Document to perform its obligations hereunder
or thereunder. No Agent-Related Person shall be under any
obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in,
or conditions of, this Agreement or any other Loan Document, or
to inspect the properties, books or records of the Company or
any of the Company's Subsidiaries or Affiliates.
9.04 Reliance by Agent. (a) The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any
writing, resolution, notice, consent, certificate, affidavit,
letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed in good
faith by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by
the Agent. The Agent shall be fully justified in failing or
refusing to take any action under this Agreement or any other
Loan Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate and,
if it so requests, it shall first be indemnified to its
satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in
accordance with a request or consent of the Required Banks and
such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the
conditions specified in Section 4.01, each Bank that has
executed this Agreement shall be deemed to have consented to,
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approved or accepted or to be satisfied with, each document or
other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to
be consented to or approved by or acceptable or satisfactory to
the Bank.
9.05 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default, except with respect to defaults in the payment
of principal, interest and fees required to be paid to the Agent
for the account of the Banks, unless the Agent shall have
received written notice from a Bank or the Company referring to
this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default". The Agent
will notify the Banks of its receipt of any such notice. The
Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Banks in
accordance with Article VIII; provided, however, that unless and
until the Agent has received any such request, the Agent may
(but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event
of Default as it shall deem advisable or in the best interest of
the Banks.
9.06 Credit Decision. Each Bank acknowledges that none of
the Agent-Related Persons has made any representation or
warranty to it, and that no act by the Agent hereinafter taken,
including any review of the affairs of the Company and its
Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Bank. Each Bank
represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such
documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and credit
worthiness of the Company and its Subsidiaries, and all
applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder.
Each Bank also represents that it will, independently and
without reliance upon any Agent-Related Person and based on such
documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and
decisions in taking or not taking action under this Agreement
and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition
and credit worthiness of the Company. Except for notices,
reports and other documents expressly herein required to be
furnished to the Banks by the Agent, the Agent shall not have
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any duty or responsibility to provide any Bank with any credit
or other information concerning the business, prospects,
operations, property, financial and other condition or credit
worthiness of the Company which may come into the possession of
any of the Agent-Related Persons.
9.07 Indemnification of Agent. Whether or not the
transactions contemplated hereby are consummated, the Banks
shall indemnify upon demand the Agent-Related Persons (to the
extent not reimbursed by or on behalf of the Company and without
limiting the obligation of the Company to do so), pro rata, from
and against any and all Indemnified Liabilities; provided,
however, that no Bank shall be liable for the payment to the
Agent-Related Persons of any portion of such Indemnified
Liabilities resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing,
each Bank shall reimburse the Agent upon demand for its ratable
share of any costs or out-of-pocket expenses (including
reasonable Attorney Costs) incurred by the Agent in connection
with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this
Agreement, any other Loan Document, or any document contemplated
by or referred to herein, to the extent that the Agent is not
reimbursed for such expenses by or on behalf of the Company.
The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the
Agent.
9.08 Agent in Individual Capacity. BofA and its Affiliates
may make loans to, issue letters of credit for the account of,
accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory,
underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent
hereunder and without notice to or consent of the Banks. The
Banks acknowledge that, pursuant to such activities, BofA or its
Affiliates may receive information regarding the Company or its
Affiliates (including information that may be subject to
confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no
obligation to provide such information to them. With respect to
its Loans, BofA shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as though
it were not the Agent, and the terms "Bank" and "Banks" include
BofA in its individual capacity.
9.09 Successor Agent. The Agent may, and at the request of
the Required Banks shall, resign as Agent upon 30 days' notice
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to the Banks. If the Agent resigns under this Agreement, the
Required Banks shall appoint from among the Banks a successor
agent for the Banks. If no successor agent is appointed prior
to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Banks and the Company, a
successor agent from among the Banks. Upon the acceptance of
its appointment as successor agent hereunder, such successor
agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as
Agent shall be terminated. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Article
IX and Sections 10.04 and 10.05 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was
Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a
retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and
the Banks shall perform all of the duties of the Agent hereunder
until such time, if any, as the Required Banks appoint a
successor agent as provided for above.
9.10 Withholding Tax. (a) If any Bank is a "foreign
corporation, partnership or trust" within the meaning of the
Code and such Bank claims exemption from, or a reduction of,
U.S. withholding tax under Sections 1441 or 1442 of the Code,
such Bank agrees with and in favor of the Agent and the Company,
to deliver to the Agent (which will deliver a copy to the
Company):
(i) if such Bank claims an exemption from, or a
reduction of, withholding tax under a United States tax
treaty, two properly completed and executed copies of IRS
Form 1001 before the payment of any interest in the first
calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be
paid under this Agreement;
(ii) if such Bank claims that interest paid under
this Agreement is exempt from United States withholding tax
because it is effectively connected with a United States
trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Bank and
in each succeeding taxable year of such Bank during which
interest may be paid under this Agreement; and
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(iii) such other form or forms as may be required
under the Code or other laws of the United States as a
condition to exemption from, or reduction of, United States
withholding tax.
Such Bank agrees to promptly notify the Agent (which
will notify the Company) of any change in circumstances which
would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction
of, withholding tax under a United States tax treaty by
providing IRS Form 1001 and such Bank sells, assigns, grants a
participation in, or otherwise transfers all or part of the
Obligations of the Company to such Bank, such Bank agrees to
notify the Agent (which will notify the Company) of the
percentage amount in which it is no longer the beneficial owner
of Obligations of the Company to such Bank. To the extent of
such percentage amount, the Agent and the Company will treat
such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States
withholding tax by filing IRS Form 4224 with the Agent sells,
assigns, grants a participation in, or otherwise transfers all
or part of the Obligations of the Company to such Bank, such
Bank agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and
1442 of the Code.
(d) If any Bank is entitled to a reduction in the
applicable withholding tax, the Agent may withhold from any
interest payment to such Bank an amount equivalent to the
applicable withholding tax after taking into account such
reduction. However, if the forms or other documentation
required by subsection (a) of this Section are not delivered to
the Agent, then the Agent may withhold from any interest payment
to such Bank not providing such forms or other documentation an
amount equivalent to the applicable withholding tax imposed by
Sections 1441 and 1442 of the Code, without reduction.
(e) If the IRS or any other Governmental Authority of
the United States or other jurisdiction asserts a claim that the
Agent did not properly withhold tax from amounts paid to or for
the account of any Bank (because the appropriate form was not
delivered or was not properly executed, or because such Bank
failed to notify the Agent of a change in circumstances which
rendered the exemption from, or reduction of, withholding tax
ineffective, or for any other reason) such Bank shall indemnify
the Agent fully for all amounts paid, directly or indirectly, by
the Agent as tax or otherwise, including penalties and interest,
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and including any taxes imposed by any jurisdiction on the
amounts payable to the Agent under this Section, together with
all costs and expenses (including Attorney Costs). The
obligation of the Banks under this subsection shall survive the
payment of all Obligations and the resignation or replacement of
the Agent.
9.11 Co-Agents. None of the Banks identified on the facing
page or signature pages of this Agreement or elsewhere herein as
a "co-agent" shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those
applicable to all Banks as such. Without limiting the
foregoing, none of the Banks so identified as a "co-agent" shall
have or be deemed to have any fiduciary relationship with any
Bank. Each Bank acknowledges that it has not relied, and will
not rely, on any of the Banks so identified in deciding to enter
into this Agreement or in taking or not taking action hereunder.
ARTICLE X
MISCELLANEOUS
10.01 Amendments and Waivers. No amendment or waiver of
any provision of this Agreement or any other Loan Document, and
no consent with respect to any departure by the Company
therefrom, shall be effective unless the same shall be in
writing and signed by the Required Banks (or by the Agent at the
written request of the Required Banks) and the Company and
acknowledged by the Agent, and then any such waiver or consent
shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no
such waiver, amendment, or consent shall, unless in writing and
signed by all the Banks and the Company and acknowledged by the
Agent, do any of the following:
(a) increase or extend the Commitment of any Bank (or
reinstate any Commitment terminated pursuant to Section 8.02);
(b) postpone or delay any date fixed by this Agreement
or any other Loan Document for any payment of principal,
interest, fees or other amounts due to the Banks (or any of
them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest
specified herein on any Loan, or (subject to clause (ii) below)
any fees or other amounts payable hereunder or under any other
Loan Document;
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(d) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Loans which is required
for the Banks or any of them to take any action hereunder;
(e) amend this Section, Section 2.15, the definition
of "Required Banks" or "Majority Banks" or any provision herein
providing for consent or other action by all Banks; or
(f) release any Material Subsidiary from its
obligations under the Subsidiary Guaranty to which it is a party
or terminate such Subsidiary Guaranty, except as expressly
provided for therein;
and, provided further, that (i) no amendment, waiver or consent
shall, unless in writing and signed by the Agent in addition to
the Required Banks or all the Banks, as the case may be, affect
the rights or duties of the Agent under this Agreement or any
other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by
the parties thereto.
10.02 Notices. (a) All notices, requests, consents,
approvals, waivers and other communications shall be in writing
(including, unless the context expressly otherwise provides, by
facsimile transmission, provided that any matter transmitted by
or to the Company by facsimile (i) shall be immediately
confirmed by a telephone call to the recipient at the number
specified on Schedule 10.02, and (ii) except in the case of
notices to the Company under Article II, shall be followed
promptly by delivery of a hard copy original thereof) and
mailed, faxed or delivered, to the address or facsimile number
specified for notices on Schedule 10.02; or, as directed to the
Company or the Agent, to such other address as shall be
designated by such party in a written notice to the other
parties, and as directed to any other party, at such other
address as shall be designated by such party in a written notice
to the Company and the Agent.
(b) All such notices, requests and communications
shall, when transmitted by overnight delivery, or faxed, be
effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively,
or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery;
except that notices pursuant to Article II or IX to the Agent
shall not be effective until actually received by the Agent.
(c) Any agreement of the Agent and the Banks herein to
receive certain notices by telephone or facsimile is solely for
the convenience and at the request of the Company. The Agent
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and the Banks shall be entitled to rely on the authority of any
Person purporting to be a Person authorized by the Company to
give such notice and the Agent and the Banks shall not have any
liability to the Company or other Person on account of any
action taken or not taken by the Agent or the Banks in reliance
upon such telephonic or facsimile notice. The obligation of the
Company to repay the Loans shall not be affected in any way or
to any extent by any failure by the Agent and the Banks to
receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Banks of a
confirmation which is at variance with the terms understood by
the Agent and the Banks to be contained in the telephonic or
facsimile notice.
10.03 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Agent or
any Bank, any right, remedy, power or privilege hereunder, shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise
of any other right, remedy, power or privilege.
10.04 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated
hereby are consummated, pay or reimburse BofA (including in its
capacity as Agent) within five Business Days after demand
(subject to subsection 4.01(e)) for all reasonable costs and
expenses (excluding travel expenses) incurred by BofA (including
in its capacity as Agent) in connection with the development,
preparation, delivery, administration and execution of, and any
amendment, supplement, waiver or modification to (in each case,
whether or not consummated), this Agreement, any Loan Document
and any other documents prepared in connection herewith or
therewith, and the consummation of the transactions contemplated
hereby and thereby, including reasonable Attorney Costs incurred
by BofA (including in its capacity as Agent) with respect
thereto; and
(b) pay or reimburse the Agent and each Bank within
five Business Days after demand (subject to subsection 4.01(e))
for all costs and expenses (including Attorney Costs) incurred
by them in connection with the enforcement, attempted
enforcement, or preservation of any rights or remedies under
this Agreement or any other Loan Document during the existence
of an Event of Default or after acceleration of the Loans
(including in connection with any "workout" or restructuring
regarding the Loans, and including in any Insolvency Proceeding
or appellate proceeding).
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10.05 Company Indemnification. Whether or not the
transactions contemplated hereby are consummated, the Company
shall indemnify, defend and hold the Agent-Related Persons, and
each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an
"Indemnified Person") harmless from and against any and all
liabilities, claims, obligations, losses, damages, penalties,
actions, judgments, suits, costs, charges, expenses and
disbursements (including reasonable (given due regard to the
prevailing circumstances) Attorney Costs) of any kind or nature
whatsoever which may at any time (including at any time
following repayment of the Loans and the termination,
resignation or replacement of the Agent or replacement of any
Bank) be imposed on, incurred by or asserted against any such
Person in any way relating to or arising out of this Agreement
or any document contemplated by or referred to herein, or the
transactions contemplated hereby, or any action taken or omitted
by any such Person under or in connection with any of the
foregoing, including with respect to any investigation,
litigation or proceeding (including any Insolvency Proceeding or
appellate proceeding) related to or arising out of this
Agreement or the Loans or the use of the proceeds thereof,
whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities");
provided, that the Company shall have no obligation hereunder to
any Indemnified Person with respect to Indemnified Liabilities
resulting solely from the gross negligence or willful misconduct
of such Indemnified Person. The agreements in this Section shall
survive payment of all other Obligations.
10.06 Payments Set Aside. To the extent that the Company
makes a payment to the Agent or the Banks, or the Agent or the
Banks exercise their right of set-off, and such payment or the
proceeds of such set-off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered
into by the Agent or such Bank in its discretion) to be repaid
to a trustee, receiver or any other party, in connection with
any Insolvency Proceeding or otherwise, then (a) to the extent
of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full
force and effect as if such payment had not been made or such
set-off had not occurred, and (b) each Bank severally agrees to
pay to the Agent upon demand its pro rata share of any amount so
recovered from or repaid by the Agent.
10.07 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
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except that the Company may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of the Agent and each Bank.
10.08 Assignments, Participations, etc. (a) Any Bank may,
with the written consent of the Company at all times other than
during the existence of an Event of Default and the Agent, which
consents shall not be unreasonably withheld or delayed, at any
time assign and delegate to one or more Eligible Assignees
(provided that no written consent of the Company or the Agent
shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an
Affiliate of such Bank) (each an "Assignee") all, or any ratable
part of all, of the Loans, the Commitments and the other rights
and obligations of such Bank hereunder, in a minimum amount of
$10,000,000 or, if less, the remaining Commitment of such Bank;
provided, however, that after giving effect to any such
assignment, the Commitment of the assignor Bank shall be at
least $10,000,000 unless such Bank's entire Commitment is
assigned; and provided, further, that the Company and the Agent
may continue to deal solely and directly with such assignor Bank
in connection with the interest so assigned to an Assignee until
(i) written notice of such assignment, together with payment
instructions, addresses and related information with respect to
the Assignee, shall have been given to the Company and the Agent
by such Bank and the Assignee; (ii) such Bank and its Assignee
shall have delivered to the Company and the Agent an Assignment
and Acceptance in the form of Exhibit E ("Assignment and
Acceptance") together with any Note or Notes subject to such
assignment and (iii) the assignor Bank or Assignee has paid to
the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies
the assignor Bank that it has received (and provided its consent
with respect to) an executed Assignment and Acceptance and
payment of the above-referenced processing fee, (i) the Assignee
thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the
rights and obligations of a Bank under the Loan Documents, and
(ii) the assignor Bank shall, to the extent that rights and
obligations hereunder and under the other Loan Documents have
been assigned by it pursuant to such Assignment and Acceptance,
relinquish its rights and be released from its obligations under
the Loan Documents.
(c) Within five Business Days after receipt of notice
from the Agent that the Agent has received an executed
Assignment and Acceptance and payment of the processing fee (and
provided that it consents to such assignment if such consent is
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required in accordance with subsection 10.08(a)), if requested
by the assignor Bank or the Assignee, through the Agent, the
Company shall execute and deliver to the Agent new Notes
evidencing such Assignee's assigned Loans and Commitment and, if
the assignor Bank has retained a portion of its Loans and its
Commitment, replacement Notes in the principal amount of the
Loans retained by the assignor Bank (such Notes to be in
exchange for, but not in payment of, the Notes held by such
Bank), and upon delivery by the Company to the Agent of the new
Notes evidencing the assigned Loans and Commitment and, if
applicable, any replacement Notes in favor of the assignor Bank,
the Agent shall mark the original Notes payable to the assignor
Bank "replaced and cancelled" and deliver such Notes to the
Company. Immediately upon each Assignee's making its
processing fee payment under the Assignment and Acceptance, this
Agreement shall be deemed to be amended to the extent, but only
to the extent, necessary to reflect the addition of the Assignee
and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall
reduce such Commitment of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more
commercial banks or other Persons not Affiliates of the Company
(a "Participant") participating interests in any Loans, the
Commitment of that Bank and the other interests of that Bank
(the "Originator") hereunder and under the other Loan Documents;
provided, however, that (i) the Originator's obligations under
this Agreement shall remain unchanged, (ii) the Originator shall
remain solely responsible for the performance of such
obligations, (iii) the Company and the Agent shall continue to
deal solely and directly with the Originator in connection with
the Originator's rights and obligations under this Agreement and
the other Loan Documents, and (iv) no Bank shall transfer or
grant any participating interest under which the Participant has
rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document,
except to the extent such amendment, consent or waiver would
require unanimous consent of the Banks as described in the first
proviso to Section 10.01. In the case of any such participation,
the Participant shall be entitled to the benefit of Sections
3.01, 3.03 and 10.05 as though it were also a Bank hereunder
(but, in the case of Sections 3.01 and 3.03, solely to the
extent that the amounts claimed thereunder by such Participant
do not exceed the amounts that could be claimed thereunder by
the Bank which sold a participation interest to such Participant
had such Bank not sold such participation interest), and, if
amounts outstanding under this Agreement are due and unpaid, or
shall have been declared or shall have become due and payable
upon the occurrence of an Event of Default, each Participant
shall be deemed to have the right of set-off in respect of its
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participating interest in amounts owing under this Agreement to
the same extent as if the amount of its participating interest
were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this
Agreement, any Bank may at any time create a security interest
in, or pledge, all or any portion of its rights under and
interest in this Agreement and any Note held by it in favor of
any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR 203.14, and such Federal
Reserve Bank may enforce such pledge or security interest in any
manner permitted under applicable law.
10.09 Confidentiality. Each Bank agrees to take and to
cause its Affiliates to take normal and reasonable precautions
and exercise due care to maintain the confidentiality of all
information identified as "confidential" or "secret" by the
Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or such Subsidiary's behalf, under
this Agreement or any other Loan Document, and neither it nor
any of its Affiliates shall use any such information other than
in connection with or in enforcement of this Agreement and the
other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or
becomes generally available to the public other than as a result
of disclosure by the Bank, or (ii) was or becomes available on a
non-confidential basis from a source other than the Company,
provided that such source is not bound by a confidentiality
agreement with the Company known to the Bank; provided, however,
that any Bank may disclose such information (A) at the request
or pursuant to any requirement of any Governmental Authority to
which the Bank is subject or in connection with an examination
of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance
with the provisions of any applicable Requirement of Law; (D) to
the extent reasonably required in connection with any litigation
or proceeding to which the Agent, any Bank or their respective
Affiliates may be party; (E) to the extent reasonably required
in connection with the exercise of any remedy hereunder or under
any other Loan Document; (F) to such Bank's independent auditors
and other professional advisors; (G) to any Participant or
Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same
extent required of the Banks hereunder; (H) as to any Bank or
its Affiliate, as expressly permitted under the terms of any
other document or agreement regarding confidentiality to which
the Company or any Subsidiary is party or is deemed party with
such Bank or such Affiliate; and (I) to its Affiliates;
provided, that with respect to disclosures under clauses (B) and
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<PAGE>
(D), such Bank shall use commercially reasonable efforts to
notify the Company (unless such notification is prohibited by
any applicable Requirement of Law) of the proposed disclosure
before such disclosure is made to reasonably afford the Company
the opportunity to seek to prevent such disclosure.
10.10 Set-off. In addition to any rights and remedies of
the Banks provided by law, if an Event of Default exists or the
Loans have been accelerated, each Bank is authorized at any time
and from time to time, without prior notice to the Company, any
such notice being waived by the Company to the fullest extent
permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at
any time held by, and other indebtedness at any time owing by,
such Bank to or for the credit or the account of the Company
against any and all Obligations owing to such Bank, now or
hereafter existing, irrespective of whether or not the Agent or
such Bank shall have made demand under this Agreement or any
Loan Document and although such Obligations may be contingent or
unmatured. Each Bank agrees promptly to notify the Company and
the Agent after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.
10.11 Automatic Debits of Fees. With respect to any fee, or
any other cost or expense (including Attorney Costs as provided
for herein) due and payable to the Agent, BofA or the Arranger
under the Loan Documents, the Company hereby irrevocably
authorizes BofA to debit any deposit account of the Company with
BofA in an amount such that the aggregate amount debited from all
such deposit accounts does not exceed such fee or other cost or
expense. If there are insufficient funds in such deposit
accounts to cover the amount of the fee or other cost or expense
then due, such debits will be reversed (in whole or in part, in
BofA's sole discretion) and such amount not debited shall be
deemed to be unpaid. No such debit under this Section shall be
deemed a set-off.
10.12 Notification of Addresses, Lending Offices, Etc. Each
Bank shall notify the Agent in writing of any changes in the
address to which notices to the Bank should be directed, of
addresses of any Lending Office, of payment instructions in
respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably
request.
10.13 Counterparts. This Agreement may be executed in any
number of separate counterparts, each of which, when so executed,
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<PAGE>
shall be deemed an original, and all of said counterparts taken
together shall be deemed to constitute but one and the same
instrument.
10.14 Severability. The illegality or unenforceability of
any provision of this Agreement or any instrument or agreement
required hereunder shall not in any way affect or impair the
legality or enforceability of the remaining provisions of this
Agreement or any instrument or agreement required hereunder.
10.15 No Third Parties Benefited. This Agreement is made
and entered into for the sole protection and legal benefit of the
Company, the Banks, the Agent and the Agent-Related Persons, and
their permitted successors and assigns, and no other Person shall
be a direct or indirect legal beneficiary of, or have any direct
or indirect cause of action or claim in connection with, this
Agreement or any of the other Loan Documents.
10.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT
AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF OREGON; PROVIDED THAT THE AGENT AND THE BANKS SHALL
RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE ANY
UNITED STATES FEDERAL OR OREGON STATE COURT SITTING IN PORTLAND,
OREGON, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF
THE COMPANY, THE AGENT AND THE BANKS CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF
THOSE COURTS. EACH OF THE COMPANY, THE AGENT, AND THE BANKS
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT
OR ANY DOCUMENT RELATED HERETO.
10.17 Waiver of Jury Trial. THE COMPANY, THE BANKS, AND THE
AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR ANY AGENT-RELATED PERSON,
PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS,
TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE BANKS, AND THE AGENT
EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING,
THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL
BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
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<PAGE>
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR
THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
10.18 OREGON LEGAL NOTICE. UNDER OREGON LAW, MOST
AGREEMENTS, PROMISES AND COMMITMENTS MADE BY US AFTER OCTOBER 3,
1989, CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT
FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY
THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS
CONSIDERATION AND BE SIGNED BY US TO BE ENFORCEABLE. THE TERM
"US" MEANS THE AGENT AND THE BANKS.
10.19 Entire Agreement. This Agreement, together with the
other Loan Documents, embodies the entire agreement and
understanding among the Company, the Banks and the Agent, and
supersedes all prior or contemporaneous agreements and
understandings of such Persons, oral or written, relating to the
subject matter hereof and thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
PRECISION CASTPARTS CORP.
By: /s/ WILLIAM D. LARSSON
___________________
Name: William D. Larsson
___________________
Title: Vice President and
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
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<PAGE>
By: /s/ IVO BAKOVIC
______________________
Name: Ivo Bakovic
______________________
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
By: /s/ STEVEN F. STERLING
______________________
Name: Steven F. Sterling
______________________
Title: Vice President
THE BANK OF NOVA SCOTIA, as co-agent
and as a Bank
By: /s/ ERRETT E. HUMMEL
______________________
Name: Errett E. Hummel
______________________
Title: Officer
By: /s/ M. BROWN
______________________
Name: M. Brown
______________________
Title: Officer
WACHOVIA BANK OF GEORGIA, N.A., as
co-agent and as a Bank
By: /s/ WILLIAM F. HAMLET
______________________
Name: William F. Hamlet
______________________
Title: Senior Vice President
By: ______________________
Name: ______________________
Title: ______________________
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<PAGE>
ABN AMRO BANK N.V.
By: ABN AMRO North America,
Inc., as agent
By: /s/ DAVID MCGINNIS
______________________
Name: David McGinnis
______________________
Title: Vice President & Director
By: /s/ LEIF OLSSON
______________________
Name: Leif Olsson
______________________
Title: Group Vice President &
Director
FIRST INTERSTATE BANK OF OREGON,
N.A.
By: /s/ KATHLEEN S. SWIFT
______________________
Name: Kathleen S. Swift
______________________
Title: Vice President
By: ______________________
Name: ______________________
Title: ______________________
SOCIETE GENERALE
By: /s/ J. BLAINE SHAWM
______________________
Name: J. Blaine Shawm
______________________
Title: Regional Manager
First Vice President
By: ______________________
Name: ______________________
Title: ______________________
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<PAGE>
THE BANK OF NEW YORK
By: /s/ ROBERT LOUK
______________________
Name: Robert Louk
______________________
Title: Vice President
By: ______________________
Name: ______________________
Title: ______________________
THE BANK OF TOKYO, LTD.
PORTLAND BRANCH
By: /s/ M.W. KRINGLEN
______________________
Name: M.W. Kringlen
______________________
Title: Vice President & Manager
UNITED STATES NATIONAL BANK OF
OREGON
By: /s/ JANICE T. THEDE
______________________
Name: Janice T. Thede
______________________
Title: Vice President
By: ______________________
Name: ______________________
Title: ______________________
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EXHIBIT (10)G
<PAGE>
PRECISION CASTPARTS CORP.
CORPORATE EXECUTIVE BONUS PROGRAM
FY 1996
PURPOSE OF THE PROGRAM
The purpose of the Corporate Executive Bonus Program is to
use a combination of performance elements to focus management
attention on various objectives to improve shareholder value
and to reward participants for achieving these objectives.
OPERATION OF THE PROGRAM
I. Eligibility
A. Corporate managers and executive officers, as
listed on Attachment I, who are continuously
employed from the beginning of each fiscal year
through the date of payment of bonus are eligible
to participate in the Corporate Executive Bonus
Program. Individuals listed on Attachment I are
not eligible to participate in the Quarterly Cash
Bonus Program.
B. Corporate managers and executive officers whose
employment in that capacity starts after the
beginning of the fiscal year or whose employment in
that capacity terminates prior to the date of
payment of the bonus are eligible to participate in
the Corporate Executive Bonus Program only if
approved by the Board of Directors.
II. Basis of Distribution
A. Bonus Opportunity Levels
Bonus opportunity levels are established for each
participant at the beginning of the fiscal year, or
on a subsequent date if employment as a Corporate
manager or executive officer starts after the
beginning of the fiscal year. Bonus opportunity
levels are assigned to each participant and
approved by the Compensation Committee of the Board
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<PAGE>
of Directors based on many elements, including
competitive rates of pay, internal equity and the
ability to influence Corporate results.
Bonus awards as a percentage of base salary are
determined based on the following Bonus Opportunity
Levels:
<TABLE>
<CAPTION>
Bonus Opportunity Levels
--------------------------
Stretch
Threshold Target Objective
_____________________________
<S> <C> <C> <C>
President and CEO 30% 60% 100%
Vice President and CFO 27 54 90
Vice President - Administration 24 48 80
Corporate Managers 18 36 60
</TABLE>
The Targeted Bonus Percent is set at 60% of the
Stretch Objective, and the Threshold is set at 50%
of the Target.
B. Performance Elements
The Company's performance will be measured based on
four Performance Elements which will be assigned
expected results and weightings. The Compensation
Committee of the Board of Directors shall approve
each year the Performance Elements, and the
expected results and weightings for each
Performance Element.
The four Performance Elements designated for fiscal
1996 and the assigned weightings are provided
below, along with the method of calculating each
Performance Element:
Weighting
1. Earnings per Share. Net income 40%
divided by the weighted average
number of shares outstanding.
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<PAGE>
2. Operating Working Capital per Sales Dollar.
The sum of accounts receivables 20
and FIFO inventories as of
year-end, less accounts
payables, divided by annualized
Q4 sales.
3. Gross Margin Percent. Total sales 20
less cost of goods sold, divided by
total sales.
4. Return on Equity. Net income, 20
divided by the beginning of the
year total shareholders' equity. ___
100%
===
For achievement of each Performance Element, points
are awarded which reflect the relative weighting of
the four Performance Elements.
Attachment II summarizes for fiscal 1996 the
expected results for each Performance Element and
Bonus Opportunity Level (Threshold, Target and
Stretch Objective), and summarizes the points
awarded for achievement of the expected results.
C. Eligible Compensation
Eligible Compensation reflects each participant's
annual base salary paid during the fiscal year, or
paid during the period of eligibility if employment
as a Corporate manager or executive officer started
after the beginning of the fiscal year. See
Attachment I for Eligible Compensation estimates,
based on salary rates at the beginning of the
fiscal year.
III. Determination of Initial Bonus Award
A. Actual results for each Performance Element will be
determined based on year-end financial results as
reflected in the audited financial statements. The
initial bonus award for each participant will be
determined as follows.
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<PAGE>
1. If the actual Return on Equity is less than
10%, no points are awarded for any Performance
Element, resulting in an initial bonus award of
zero.
2. If the actual Return on Equity is greater than
or equal to 10%, actual results are measured for
each Performance Element and points are awarded
for performance which falls at or above the
Threshold Bonus Opportunity Level. When actual
results fall between the Threshold and Target or
between the Target and the Stretch Objective,
the points to be awarded are interpolated on a
straight-line basis between the two nearest
bonus opportunity levels. Results in excess of
the Stretch Objective are awarded points on a
straight line basis based on the points awarded
for performance between the Target and the
Stretch Objective.
3. Points for each Performance Element are summed
and the total is divided by 100 to yield a Bonus
Factor. The Bonus Factor is applied to each
participants' Targeted Bonus Percent to reflect
the Bonus Percent Earned.
4. The Initial Bonus Award reflects the Bonus
Percent Earned multiplied by each participant's
Eligible Compensation.
Attachment III provides illustrative calculations
of Initial Bonus Awards for each participant based
on FY1996 budgeted results. The exhibit shows the
level to which each calculation will be rounded.
B. The computation of the Initial Bonus Award is an
annual computation. Overperformance or
underperformance in any year cannot be carried
forward or carried backward for use in another
year's computation.
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<PAGE>
IV. Individual Performance Adjustment
The Board of Directors may adjust the Initial Bonus
Award upward or downward by up to 25% to reflect
individual performance. The Bonus Award for any
participant may range from 75% to 125% of the Initial
Bonus Award.
V. Discretionary Bonus Awards and Determination of Bonus
Pool
The Board of Directors may approve Discretionary Bonuses
as special awards to outstanding performers. A
Discretionary Bonus Pool equal to 50% of the total
targeted bonus opportunity amount for all participants
included in the Corporate Executive Bonus Program will
be accrued each year. Amounts not awarded from the
Discretionary Bonus Pool may be carried over to
subsequent fiscal years.
VI. Payment of Bonus Awards and Discretionary Bonuses
Bonus Awards and any Discretionary Bonuses will be paid
within 60 days following the end of the Company's fiscal
year and after receipt of audited financial statements.
VII. Unexpected Changes in Operations or Unusual Adjustments
In the event of major unexpected changes in operations
or unusual adjustments during the fiscal year, Company
management may recommend adjustments or changes to the
approved bonus program. The Board of Directors will
have final approval on any adjustments or changes to the
approved program.
VIII. General Provisions
A. The Corporate Executive Bonus Program is
implemented solely at the discretion of the
Company, subject to approval by the Board of
Directors who reserve the right to amend, modify,
suspend, or terminate the Corporate Executive Bonus
Program.
B. Bonus Awards and Discretionary Bonuses are totally
separate from all other Company benefits with the
exception of the SERP and Long Term Disability
programs. They will not be used as a basis for
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<PAGE>
determining levels of any other benefit such as
vacation pay, life insurance coverage, future bonus
pay, etc.
C. Establishment of the Corporate Executive Bonus
Program shall not be construed as conferring any
legal rights upon any employee or any person for
continuation of employment, nor shall it interfere
with the rights of the Company to discharge any
employee without regard to the effect such
discharge might have upon the employee's
eligibility or receipt of benefits through the
Corporate Executive Bonus Program.
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<PAGE>
EXHIBIT 11
PRECISION CASTPARTS CORP.
CALCULATION OF EARNINGS PER SHARE
FOR THE YEAR ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
Earnings Earnings Per
Per Share (1) Share
<S> <C> <C>
Weighted average number of shares
of common stock outstanding 20,377,364 20,377,364
Common stock equivalents:
Application of the "treasury stock"
method to stock option and purchase
plans -- 225,297
__________ __________
Weighted average number of shares
outstanding 20,377,364 20,602,661
========== ==========
Rounded to 20,400,000 20,600,000
========== ==========
Net income $41,100,000 $41,100,000
=========== ===========
Net income per share $2.02 $2.00
===== =====
<FN>
__________
(1) Accounting Principles Board Opinion No. 15, "Earnings Per Share,"
allows companies to disregard dilution of less than 3 percent in
the computation of earnings per share. Therefore, shares used in
computing earnings per share for financial reporting purposes are
20,400,000 shares.
</TABLE>
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<PAGE>
EXHIBIT 13
Financial Section of the 1996 Annual
Report to Shareholders of Precision
Castparts Corp.
MANAGEMENT'S DISCUSSION AND ANALYSIS
BUSINESS OVERVIEW AND OUTLOOK
In fiscal 1996, PCC experienced substantial growth in both sales and
profits from the prior year. The majority of this growth came from
PCC Specialty Products, Inc. (SPD), which was acquired at the end of
fiscal 1995. This year's results also reflected the first
indications of a general recovery in the aerospace industry which had
been experiencing a cyclical downturn since calendar 1991. PCC's
aerospace business improved during fiscal 1996 as demand for new
aircraft components and spares strengthened.
With more than two-thirds of annual sales coming from the aerospace
industry, PCC is exposed to the cyclical nature of this market.
During the aerospace downturn of the last several years, the Company
undertook major efforts to improve its core businesses and diversify
its operations. These changes are expected to enhance the Company's
prospects through the coming upswing in the aerospace cycle and
mitigate the effects of future downturns.
During the next several years, the Company expects increasing demand
from aerospace customers. Our ongoing efforts to improve production
efficiencies and shorten order-to-delivery times, along with current
projects to increase production capacity, will enable PCC to satisfy
the expected increased demand and be more responsive to customer
needs. We anticipate that both PCC and its customers will realize
substantial benefits from the improvements in the aerospace market
conditions. In addition, our expansion into new markets is expected
to contribute favorably to our results. We expect to significantly
increase our market share in industrial gas turbines. This business,
which is based on our investment casting technology, provides
opportunities for both new parts and spares sales to a large customer
base. Further growth from our investment casting operations is
expected to come from applications in sporting goods, medical, and
other industrial markets. The March 1995 acquisition of SPD, along
with the subsequent acquisitions of the Carmet Company and The
Olofsson Corporation, provides a solid base of well-established
product lines in the general industrial and automotive markets.
While the markets which SPD serves are subject to their own cycles,
these cycles tend to be less pronounced and are often countercyclical
to the aerospace cycles. In addition, PCC has excellent
opportunities for growth in its leading-edge technologies of metal
injection molding and metal-matrix composites.
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<PAGE>
We are continuing our strategy for profitable growth by focusing on
three key areas, as summarized below:
1. Continuous improvement of operating efficiencies in our existing
businesses;
2. Expansion into additional worldwide markets through development
of new product applications based on our current metal forming
technologies;
3. Acquisition of companies which are synergistic with our existing
businesses and core competencies.
We expect fiscal 1997 to be a year of continued growth and new
challenges. Several of our operations will be undergoing major
expansion to accommodate the demands of our anticipated growth. We
look forward to continuing to serve our long-standing aerospace
customers while developing our presence in new markets and
identifying opportunities for strategic acquisitions. Our goal is to
grow profitably and increase shareholder value. We believe we are
well-positioned to meet this challenge.
FINANCIAL RESULTS
Fiscal 1996 Compared with Fiscal 1995
Sales of $556.8 million represented a 28 percent increase from the
prior year. Excluding the effects of SPD, sales increased $39.1
million or 9 percent. Aerospace and aircraft gas turbine engines
represented 68 percent, or $376.0 million of total sales in fiscal
1996 as compared to 79 percent, or $343.0 million of total sales in
fiscal 1995. The lower percentage of aerospace sales reflects the
addition of SPD's sales volume in fiscal 1996. Sales to United
States government end-users were 18 percent of total sales in 1996,
slightly lower than the 19 percent in the prior year, reflecting the
impact of SPD, which has minimal sales to government end-users.
Cost of sales as a percent of sales improved from 82 percent in
fiscal 1995 to 80 percent in fiscal 1996. This improvement came from
the addition of SPD, which generates higher margins compared with
other PCC operations.
Selling and administrative costs increased to 8 percent in fiscal
1996 from 7 percent in the prior year. This increase was due to the
addition of SPD, which operates with relatively higher selling costs
compared with other Company operations.
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<PAGE>
For the year, the effective tax rate was 35 percent, compared to 38
percent in fiscal 1995. The reduction from last fiscal year was due
to the favorable impact of $2.6 million of non-recurring tax
adjustments recorded in the third quarter. These benefits included
the settlement of a state tax issue for $2.2 million and $0.4 million
from research and development tax credits. The effective tax rate
in fiscal 1997 is expected to increase, reflecting non-deductible
goodwill amortization from acquisitions and the absence of non-
recurring adjustments which provided tax benefits in fiscal 1996.
Net income in fiscal 1996 of $41.1 million was 42 percent higher than
fiscal 1995's earnings of $29.0 million and resulted in earnings per
share of $2.02 based on 20.4 million average shares outstanding, as
compared with $1.45 per share based on 20.0 million average shares
outstanding last year. Excluding the impact of the non-recurring tax
adjustments, net income in fiscal 1996 increased 30 percent to $1.89
per share.
Fiscal 1995 Compared with Fiscal 1994
Sales for fiscal 1995 increased $16.0 million, or 4 percent from the
prior year. Nearly half of the increase in sales resulted from the
acquisitions of PCC Composites and SPD. Aerospace and aircraft gas
turbine sales represented 79 percent of total sales, down $9.4
million compared with fiscal 1994, while sales of other industrial
and commercial products increased by $25.4 million, or 37 percent,
reflecting the Company's continued diversification into non-aerospace
markets. Sales to United States government end-users were 19 percent
of sales in 1995 and 21 percent in fiscal 1994. This decline
reflects both the impact of lower military spending levels and the
increasing diversification of PCC's customer base.
Cost of sales as a percent of sales improved to 82 percent in 1995
from 84 percent in the prior year. This improvement came largely
from the higher volume of sales to non-aerospace markets, which yield
relatively higher margins. These higher margins were partially
offset by increased manufacturing costs related to development of new
parts for industrial gas turbine applications, metal matrix composite
applications, and turbocharger wheels for the trucking industry.
Selling and administrative costs remained constant at 7 percent of
sales in fiscal 1995.
In fiscal 1995, the effective tax rate was 38 percent as compared
with an effective tax rate of 33 percent in 1994. The fiscal 1994
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<PAGE>
effective tax rate included a 6 percentage point reduction,
reflecting the net effect of a $2.7 million benefit for research and
development tax credits, partially offset by $0.6 million of tax
expense related to adjustment of deferred taxes to reflect the
increase in federal tax rates from 34 percent to 35 percent.
Net income of $29.0 million in fiscal 1995 was 31 percent higher than
the $22.2 million earned in the prior year. Income in fiscal 1994
reflected the $2.9 million after tax expense due to the effect of the
accounting change for postretirement benefits. Earnings per share in
1995 were $1.45 based on 20.0 million shares outstanding versus $1.14
based on 19.5 million shares outstanding in the prior year. These
earnings per share results reflect a three-for-two stock split
effective in August, 1994.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, total capitalization of $317.0 million consisted
of $13.9 million of debt and $303.1 million of equity. The debt-to-
equity ratio at the end of fiscal 1996 was 5 percent, down from 10
percent at the end of the prior year.
For the year, earnings generated $65.1 million of cash, and working
capital reductions provided an additional $6.9 million. Capital
expenditures totaled $19.7 million, and $21.2 million was spent for
the acquisition of the Carmet Company. The sale of $9.0 million of
common stock through the exercise of stock options was more than
offset by cash dividends of $4.9 million and debt repayments of $12.1
million. Cash and cash equivalents were $26.2 million at year end,
an increase of $22.3 million from the $3.9 million at the beginning
of the year.
During the year, PCC obtained a $200.0 million committed line of
credit from a syndication of nine banks in anticipation of future
cash flow demands for expansion of existing businesses and
acquisitions. At fiscal year end, there were no borrowings
outstanding on this line. Subsequent to year end, the Company
borrowed $32.0 million of the $52.2 million purchase price for its
acquisition of The Olofsson Corporation.
Capital spending in fiscal 1997 is expected to be approximately $65
million, which is significantly higher than prior years. The
majority of the anticipated expenditures is for capacity expansion to
accommodate expected growth in aerospace and industrial gas turbine
markets. Management believes that the Company can fund the
requirements for capital spending, cash dividends, and potential
acquisitions from cash balances, the existing line of credit,
additional borrowings, or the issuance of stock.
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</Page>
<PAGE>
Consolidated Statements of Income
Precision Castparts Corp. and Subsidiaries
(In thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Years Ended
____________________________________________________________
______
March 31, April 2, April 3,
1996 1995 1994
____________________________________________________________
______
<S> <C> <C> <C>
Net Sales $556,800 $436,400 $420,400
Cost of Goods Sold 446,100 359,500 351,700
Selling and Administrative Expenses 46,900 31,600 30,200
Interest Expense (Income), net 100 (1,500) 1,100
____________________________________________________________
______
Income before Provision
for Income Taxes 63,700 46,800 37,400
Provision for Income
Taxes 22,600 17,800 12,300
____________________________________________________________
______
Income before Cumulative Effect
of Accounting Change 41,100 29,000 25,100
Cumulative Effect of Change in
Accounting for Postretirement
Benefits Other Than Pensions
(net of tax benefit of $1,800) -- -- (2,900)
____________________________________________________________
______
Net Income $41,100 $ 29,000 $ 22,200
____________________________________________________________
______
Page 35
</Page>
<PAGE>
Income (Charge) per Share:
Before cumulative effect of
accounting change $ 2.02 $ 1.45 $ 1.29
Cumulative effect of change
in accounting for post-
retirement benefits other
than pensions -- -- (0.15)
____________________________________________________________
______
Net Income per Common Share $ 2.02 $ 1.45 $ 1.14
____________________________________________________________
______
</TABLE>
See Notes to Financial Statements on pages 44 through 63.
Page 36
</Page>
<PAGE>
Consolidated Balance Sheets
Precision Castparts Corp. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
____________________________________________________________
______
March 31, April 2,
Assets 1996 1995
____________________________________________________________
______
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 26,200 $ 3,900
Receivables, net of reserves of
$1,100 in 1996 and $1,200 in 1995 82,000 83,100
Inventories 105,200 90,900
Prepaid expenses 2,100 2,300
Deferred income taxes 8,600 9,900
____________________________________________________________
______
Total current assets 224,100 190,100
____________________________________________________________
______
Property, Plant and Equipment, at cost:
Land 7,100 6,800
Buildings and improvements 50,200 46,500
Machinery and equipment 232,800 216,800
Construction in progress 14,900 9,100
____________________________________________________________
______
305,000 279,200
Less-Accumulated depreciation (161,200) (143,000)
____________________________________________________________
______
Net property, plant and equipment 143,800 136,200
____________________________________________________________
______
Page 37
</Page>
<PAGE>
Goodwill, net of amortization
of $3,700 in 1996 and $1,700 in 1995 80,800 77,800
Other Assets 1,800 2,600
____________________________________________________________
______
$450,500 $406,700
____________________________________________________________
______
Liabilities and Shareholders' Investment
____________________________________________________________
______
Current Liabilities:
Notes payable $ 400 $ 6,900
Current portion of long-term debt 4,700 5,400
Accounts payable 38,200 25,600
Accrued liabilities 50,800 56,500
Income taxes payable 4,200 5,800
____________________________________________________________
______
Total current liabilities 98,300 100,200
____________________________________________________________
______
Long-Term Debt, excluding current portion 8,800 13,700
Deferred Income Taxes 19,700 16,700
Accrued Retirement Benefits Obligation 11,900 10,000
Other Long-Term Liabilities 8,700 7,700
Shareholders' Investment:
Common stock, $1 stated value 20,500 20,200
Paid-in capital 13,900 5,200
Retained earnings 266,900 230,700
Cumulative translation adjustments 1,800 2,300
____________________________________________________________
______
Total shareholders' investment 303,100 258,400
____________________________________________________________
______
$450,500 $406,700
____________________________________________________________
______
</TABLE>
See Notes to Financial Statements on pages 44 through 63.
Page 38
</Page>
<PAGE>
Consolidated Statements of Cash Flows
Precision Castparts Corp. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
____________________________________________________________
______
March 31, April 2, April 3,
1996 1995 1994
____________________________________________________________
______
Cash Flows from Operating Activities:
<S> <C> <C> <C>
Net income $ 41,100 $ 29,000 $ 22,200
Non-cash items included in income:
Depreciation and amortization 22,900 23,900 28,700
Deferred income taxes 1,100 4,300 (2,500)
Cumulative effect of accounting
change -- -- 4,700
Changes in operating working capital,
excluding effects of acquisitions:
Receivables 7,100 (3,300) 20,600
Inventories (4,600) (4,300) 36,900
Payables, accruals & current taxes 3,100 (5,200) 2,800
Other 1,300 (4,200) 900
____________________________________________________________
______
Net cash provided by
operating activities 72,000 40,200 114,300
____________________________________________________________
______
Page 39
</Page>
<PAGE>
Cash Flows from Investing Activities:
Business acquisitions, net of
cash acquired (21,200) (87,500) --
Acquisition of property,
plant and equipment (19,700) (10,900) (7,400)
Other investing activities, net (500) 1,000 (600)
____________________________________________________________
_______
Net cash used by investing
activities (41,400) (97,400) (8,000)
____________________________________________________________
_______
Cash Flows from Financing Activities:
Proceeds of long-term debt -- -- 50,000
Payment of long-term debt (5,600) (4,900) (53,900)
Proceeds of notes payable 8,400 12,400 200
Payments of notes payable (14,900) (6,500) --
Repurchase of common stock -- -- (117,000)
Sale of common stock 9,000 9,200 3,100
Cash dividends (4,900) (4,400) (2,300)
Other financing activities, net (300) 100 (100)
____________________________________________________________
______
Net cash (used by) provided by
financing activities (8,300) 5,900 (120,000)
____________________________________________________________
______
Net Increase (Decrease) in Cash 22,300 (51,300) (13,700)
Cash and Cash Equivalents at
Beginning of Year 3,900 55,200 68,900
____________________________________________________________
______
Cash and Cash Equivalents at
End of Year $26,200 $ 3,900 $55,200
____________________________________________________________
______
Page 40
</Page>
<PAGE>
Cash Paid During the Year for:
Interest $ 1,200 $ 1,100 $ 1,200
Income taxes, net of refunds
received $22,200 $21,500 $ 8,400
See Notes to Financial Statements on pages 44 through 63.
</TABLE>
Page 41
</Page>
<PAGE>
Consolidated Statements of Shareholders' Investment
Precision Castparts Corp. and Subsidiaries
(In thousands)
<TABLE>
<CAPTION>
___________________________________________________________________________
__________
Common Stock Cumulative
Outstanding Paid-in Retained Translation
Shares Amount Capital Earnings Adjustments
___________________________________________________________________________
__________
<S> <C> <C> <C> <C> <C>
Balance at March 28, 1993 19,500 $13,000 $-- $186,200 $700
Net income -- -- -- 22,200 --
Cash dividends -- -- -- (2,300) --
Sale of common stock
under employee stock plan 150 100 3,100 -- --
Translation adjustments -- -- -- -- (200)
___________________________________________________________________________
__________
Balance at April 3, 1994 19,650 13,100 3,100 206,100 500
Net income -- -- -- 29,000 --
Cash dividends -- -- -- (4,400) --
Sale of common stock
under employee stock plan 550 400 8,800 -- --
Stock split -- 6,700 (6,700) -- --
Translation adjustments -- -- -- -- 1,800
___________________________________________________________________________
__________
Page 42
</Page>
<PAGE>
Balance at April 2, 1995 20,200 $20,200 $ 5,200 $230,700 2,300
Net income -- -- -- 41,100 --
Cash dividends -- -- -- (4,900) --
Sale of common stock under
employee stock plan 300 300 8,700 -- --
Translation adjustments -- -- -- -- (500)
___________________________________________________________________________
__________
Balance at March 31, 1996 20,500 $20,500 $13,900 $266,900 1,800
___________________________________
__________________________________________________
</TABLE>
See Notes to Financial Statements on pages 44 through 63.
Page 43
</Page>
<PAGE>
Notes to Financial Statements
(In thousands, except share and per share data)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the
accounts of PCC and its wholly-owned subsidiaries after
elimination of intercompany accounts and transactions. PCC's
fiscal year is based on a 52-53 week year ending the Sunday
closest to March 31.
Cash and Cash Equivalents
Cash and cash equivalents include short-term
investments with an original maturity of three months or
less. These investments are available-for-sale with market
values approximating cost.
Valuation of Inventories
The LIFO inventory cost method is utilized for work in
process and metal inventories at most domestic operations.
The average inventory cost method is utilized for all other
inventories. Costs utilized for inventory valuation
purposes include labor, material and manufacturing overhead.
Inventories valued at the lower of current average cost or
market would have been $5,200, $5,300 and $4,200 higher than
those reported at March 31, 1996, April 2, 1995 and April 3,
1994. PCC uses the single pool dollar value method for
computing LIFO inventories; therefore, it is not possible to
present the breakdown of inventories between work in process
and raw materials.
Depreciation and Capitalization
Depreciation of plant and equipment is computed on the
straight-line or declining balance method based on the
estimated service lives. Estimated lives used are 20-30
years for buildings and improvements and 5-10 years for
machinery and equipment.
Additions are recorded at cost. Expenditures for
maintenance, repairs and minor improvements are charged to
expense. Major improvements and additions are added to the
property accounts. When property is sold or retired, the
cost and accumulated depreciation are removed from the
accounts and the resulting gain or loss is included in
income.
Goodwill
Goodwill is computed on the straight-line method and is
amortized over 40 years. The future profitability and cash
Page 44
</Page>
<PAGE>
flow of the operations to which it relates are evaluated
annually. These factors, along with management's plans with
respect to the operations, are considered in assessing the
recoverability of goodwill.
Derivative Financial Instruments
At various times, the Company uses derivative financial
instruments to limit exposure to changes in foreign currency
exchange rates, interest rates and prices of strategic raw
materials. Gains or losses on these contracts, which are
designed as hedge transactions, are measured upon
settlement. The Company has controls in place which limit
the use of derivative financial instruments and ensure all
such transactions receive appropriate management attention.
At year-end, there was no material off-balance-sheet risk
from derivative financial instruments.
Certain Risks and Uncertainties
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from those estimates.
Stock Split
In August, 1994, the Company effected a three-for-two
stock split by means of a stock dividend. Accordingly,
$6,700 representing the stated value for additional shares
issued was transferred from paid-in capital to common stock.
The number of shares and earnings per share for all prior
periods has been restated to reflect the effects of this
stock split.
Earnings per Share
Earnings per share have been computed based on the
weighted average number of shares of common stock and common
stock equivalents outstanding during the periods after
giving effect to the stock split discussed above. The
number of shares used for the earnings per share calculation
was 20,400,000 in 1996, 20,000,000 in 1995 and 19,500,000 in
1994. Common stock equivalents were not material in these
years. Fully diluted amounts are not presented because they
are not materially different from amounts shown.
Page 45
</Page>
<PAGE>
ACQUISITIONS
On April 6, 1994, PCC acquired the assets of ACC
Electronics, Inc., a manufacturer of advanced technology
metal matrix composite parts, for a purchase price of
$5,100, plus assumption of outstanding debt and other
liabilities. Goodwill of $11,200 was recorded as a result
of this transaction. The business operates as PCC
Composites, Inc.
On March 8, 1995, PCC acquired 100 percent of the stock
of Quamco, Inc., a designer, manufacturer and marketer of
premium metalworking tools and machines, specialty powdered
metal parts and other specialty industrial components. The
purchase price of $89,900, which included the assumption or
retirement of outstanding debt, resulted in the recognition
of $57,700 of goodwill and other intangible assets. The
business operates as PCC Specialty Products, Inc.
The following represents the pro forma results of
operations of the Company for the years ended April 2, 1995
and April 3, 1994, assuming the acquisitions had taken place
at the beginning of each fiscal year.
<TABLE>
<CAPTION>
(Unaudited) Fiscal Years Ended
____________________________________________________________
April 2, April 3,
1995 1994
____________________________________________________________
<S> <C> <C>
Net sales $513,100 $488,100
Net income $ 31,800 $ 26,100
Net income per share $ 1.59 $ 1.34
</TABLE>
PCC acquired 100 percent of the stock of the Carmet
Company on February 21, 1996. Carmet is a manufacturer of
tungsten carbide cutting tools and wear parts. The purchase
price of $21,200, which included the assumption or
retirement of debt, resulted in the recognition of $6,900 of
goodwill. The business operates as part of PCC Specialty
Products, Inc.
Page 46
</Page>
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents, receivables, payables,
accrued liabilities and short-term borrowings are reflected
in the financial statements at cost which equals fair value
because of the short-term maturity of these instruments.
The fair value of long-term debt was estimated using
the Company's year-end incremental borrowing rate for
similar types of borrowing arrangements. The amounts
reported in the consolidated balance sheets for long-term
debt approximate fair value.
CONCENTRATION OF CREDIT RISK
Approximately 70 percent of PCC's business activity in
fiscal year 1996 was with companies in the aerospace
industry. Accordingly, PCC is exposed to a concentration of
credit risk for this portion of receivables. The Company
has long-standing relationships with its aerospace customers
and management considers the credit risk to be low.
Page 47
</Page>
ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
__________________________________________________________________
March 31, April 2,
1996 1995
__________________________________________________________________
<S> <C> <C>
Salaries and wages payable $24,800 $18,400
Taxes other than income taxes 5,800 6,200
Other accrued liabilities 20,200 31,900
__________________________________________________________________
$50,800 $56,500
__________________________________________________________________
</TABLE>
NOTES PAYABLE
Notes payable at March 31, 1996, were $400.
At April 2, 1995, notes payable totaled $6,900, of
which $6,000 related to the purchase of PCC
Specialty Products.
Page 48
</Page>
<PAGE>
LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
__________________________________________________________________
March 31, April 2,
1996 1995
__________________________________________________________________
<S> <C> <C>
Notes payable, unsecured, 8.25%,
payable $3,000 annually through 1998 $6,000 $ 9,000
Industrial Development Revenue Bond,
variable interest rate not to exceed 12%,
3.20% at March 31, 1996, payable $1,400
annually through 2001 6,800 8,200
Other, 7.00% to 10.00%,
payable in various amounts
through 1998 700 1,900
__________________________________________________________________
13,500 19,100
Less-Current portion 4,700 5,400
__________________________________________________________________
$8,800 $13,700
__________________________________________________________________
</TABLE>
Page 49
</Page>
<PAGE>
In February, 1996, the Company entered into a $200,000
Bank Credit Agreement. Under the Agreement, the Company may
borrow up to $200,000 at interest rates of a) offshore rate
equal to the effective London Interbank Rate, as defined,
plus a premium of 0.35 percent to 0.75 percent based on the
consolidated leverage ratio, as defined, b) an overnight
base rate equal to the higher of the federal funds rate or
the prime rate of the agent bank plus 0.50 percent, or c) a
rate negotiated between each bank and the Company, as
applicable. The Company is required to pay a commitment fee
of 0.125 percent to 0.25 percent, based on the leverage
ratio, on unborrowed amounts. The Bank Credit Agreement is
a five-year agreement, expiring in 2001. No borrowings had
been made under this Agreement as of March 31, 1996.
The Company is subject to a number of restrictive
covenants under the various debt agreements. These
covenants, among other things, require the Company to
maintain a minimum consolidated net worth and a minimum
interest coverage ratio and limit the Company to a maximum
leverage ratio. The Company's debt agreements contain cross
default provisions. At March 31, 1996, the Company was in
compliance with all restrictive provisions of its loan
agreements.
Long-term debt is payable in each fiscal year as
follows: $4,700 in 1997 and 1998, and $1,400 in 1999, 2000,
and 2001.
Subsequent to year end, the Company repaid the $6,000
of 8.25 percent notes payable which were scheduled to be
repaid $3,000 in each 1997 and 1998.
INCOME TAXES
In fiscal 1994, PCC retroactively adopted the
provisions of Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," for all
periods after March 31, 1986, by restating the financial
statements of prior periods.
Deferred income tax assets and liabilities on the
consolidated balance sheets reflect the net tax effects of
temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the
amounts used for income tax purposes.
Page 50
</Page>
<PAGE>
Income (loss) before provision for income taxes was:
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
<S> <C> <C> <C>
__________________________________________________________________
Domestic $66,400 $46,600 $39,000
Foreign (2,700) 200 (1,600)
__________________________________________________________________
Total pretax income $63,700 $46,800 $37,400
__________________________________________________________________
</TABLE>
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
__________________________________________________________________
<S> <C> <C> <C>
Currently payable:
Federal income taxes, net of tax
credits $19,100 $10,000 $16,800
State income taxes 3,600 2,700 2,100
__________________________________________________________________
22,700 12,700 18,900
Change in deferred income taxes (100) 5,100 (6,600)
__________________________________________________________________
Page 51
</Page>
<PAGE>
Provision for income taxes $22,600 $17,800 $12,300
__________________________________________________________________
</TABLE>
During the third quarter of fiscal 1996, PCC
recorded a $2,600 benefit, equal to $0.13 per share,
for the settlement of a state tax issue and research
and development tax credits claimed in 1992.
During the first quarter of fiscal 1994, PCC
recorded a $2,400 benefit, equal to $0.12 per
share, for the settlement of research and
development tax credits claimed in 1990 and 1991.
The income tax provision in certain years is
different from the amount computed by applying the
federal statutory income tax rate of 35 percent to
income before income taxes. The reasons for this
difference are as follows:
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
__________________________________________________________________
<S> <C> <C> <C>
Statutory federal tax on income 35% 35% 35%
Increase (decrease) as a result of:
State income taxes, net of federal
tax benefit 3 4 3
State settlement (3) -- --
Page 52
</Page>
<PAGE>
Research and development tax
credits (1) -- (7)
Valuation allowance 2 -- 2
Foreign Sales Corporation benefit (2) (2) (2)
Effect of rate change on deferred
taxes -- -- 1
Other, net 1 1 1
__________________________________________________________________
Provision for income taxes 35% 38% 33%
__________________________________________________________________
</TABLE>
Significant components of PCC's deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
__________________________________________________________________
March 31, April 2,
1996 1995
__________________________________________________________________
<S> <C> <C>
Deferred tax assets arising from:
Expense accruals $16,900 $15,500
Inventory reserves 2,600 2,600
Postretirement benefits other
than pensions 2,200 2,100
Advance payments 300 2,300
Page 53
</Page>
<PAGE>
Domestic and foreign net operating
and capital loss carryforwards 4,100 3,800
Other 500 600
Valuation allowances (4,100) (3,800)
__________________________________________________________________
Gross deferred tax assets 22,500 23,100
__________________________________________________________________
Deferred tax liabilities arising from:
Depreciation/amortization 23,800 20,700
Inventory basis differences 9,600 8,200
Other 200 1,000
__________________________________________________________________
Gross deferred tax liabilities 33,600 29,900
__________________________________________________________________
Net deferred tax liability $(11,100) $(6,800)
__________________________________________________________________
</TABLE>
The Company has provided valuation allowances
for domestic and foreign net operating and capital
loss carryforwards to reduce the related future
income tax benefits to zero. The portion of the
valuation allowance related to acquired net
operating losses was $700 at March 31, 1996 and
$1,100 at April 2, 1995. If realized, this will
be recorded as a reduction to goodwill, or if not
realized, will expire in 2006.
Page 54
</Page>
<PAGE>
EMPLOYEE BENEFIT PLANS:
Employee Pension Benefits
PCC has defined benefit pension plans
covering substantially all domestic employees.
Benefits generally are based on years of service
and compensation. PCC's funding policy is to
satisfy the funding requirements of the Employee
Retirement Income Security Act.
In determining the actuarial present value of
the projected benefit obligation, the following
assumptions were used: a discount rate of 7.25
percent in 1996, 8.50 percent in 1995 and 7.25
percent in 1994; a future compensation increase
rate of 5.00 percent, and an expected long-term
rate of return on assets of 9.00 percent in all
years. The year-to-year fluctuations in the
discount rate assumptions primarily reflect
changes in interest rates. The discount rates
represent the expected yield on a portfolio of
high-grade (AA rated or equivalent) fixed-income
investments with cash flow streams sufficient to
satisfy benefit obligations under the plans when
due.
Net pension cost for each of the last three
fiscal years was as follows:
Page 55
</Page>
<PAGE>
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
__________________________________________________________________
<S> <C> <C> <C>
Service costs of benefits earned $ 4,500 $ 5,000 $ 5,200
Interest cost on the projected
benefit obligation 7,500 5,200 4,800
Actual return on plan assets (14,900) (4,300) (1,300)
Net amortization and deferral of items
not reflected in earnings 6,300 (600) (4,300)
Curtailment gain due to restructuring
activity -- -- (2,000)
___________________________________________________________________
Net pension cost $ 3,400 $ 5,300 $ 2,400
___________________________________________________________________
</TABLE>
The pension liability as of April 2, 1995,
included the assumption of liability related to
the pension plans of PCC Specialty Products as a
result of that acquisition. Reconciliation of the
funded status of the plans to the pension
liability was as follows:
<TABLE>
<CAPTION>
__________________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
__________________________________________________________________
<S> <C> <C> <C>
Page 56
</Page>
<PAGE>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 87,600 $ 74,100 $ 49,700
__________________________________________________________________
Accumulated benefit obligation $ 90,200 $ 75,000 $ 50,600
Effects of estimated future
pay increases 28,200 18,500 21,500
__________________________________________________________________
Projected benefit obligation 118,400 93,500 72,100
Plan assets at fair value 106,600 89,300 58,800
__________________________________________________________________
Funded status (11,800) (4,200) (13,300)
Unrecognized asset at
transition (2,100) (2,500) (2,800)
Prior service cost not yet
recognized (400) (500) (400)
Unrecognized net loss 9,100 400 16,000
__________________________________________________________________
Accrued pension liability $ (5,200) $ (6,800) $(500)
__________________________________________________________________
</TABLE>
Postretirement Benefits Other Than Pensions
PCC provides postretirement medical benefits
for eligible employees who have satisfied plan
eligibility provisions, which include age and/or
service requirements.
In fiscal 1994, the Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits
Other Than Pensions." Under SFAS No. 106, the
costs of retiree health care are accrued over
relevant service periods. Previously, these costs
were charged to expense as claims
Page 57
</Page>
<PAGE>
were paid. The Company elected to immediately
recognize the transition obligation, resulting in
a one-time charge of $4,700 equal to $2,900 after
tax, or $0.15 per share.
Assumptions used in determining the net
periodic postretirement benefit cost and the
accrued postretirement benefit obligation included
a discount rate of 7.25 percent in 1996, 8.50
percent in 1995 and 7.25 percent in 1994 and a
medical inflation rate of 9.00 percent in 1996,
10.00 percent in 1995 and 13.00 percent in 1994,
grading down to 5.00 percent after four, five and
eight years, respectively. The plans are
unfunded.
The components of postretirement benefits
cost were as follows:
<TABLE>
<CAPTION>
__________________________________________________________
Fiscal Fiscal Fiscal
1996 1995 1994
__________________________________________________________
<S> <C> <C> (c)
Service cost $100 $200 $300
Interest cost 600 300 300
__________________________________________________________
Postretirement benefits cost $700 $500 $600
__________________________________________________________
</TABLE>
Page 58
</Page>
<PAGE>
The accumulated postretirement benefits
obligation at March 31, 1996 and April 2, 1995 was
as follows:
<TABLE>
<CAPTION>
____________________________________________________________
March 31, April 2,
1996 1995
____________________________________________________________
Accumulated postretirement benefits obligation:
<S> <C> <C>
Retirees $3,000 $2,900
Eligible active plan participants 1,500 1,000
Other active plan participants 3,200 2,700
____________________________________________________________
7,700 6,600
Unrecognized net (gain)loss 400 (700)
____________________________________________________________
Accrued postretirement benefits
liability $7,300 $7,300
____________________________________________________________
</TABLE>
Page 59
</Page>
<PAGE>
A one percent increase in the annual health care trend
rates would have increased the accumulated postretirement
benefits obligation at March 31, 1996 by $800 and at April
2, 1995 by $600 and increased the postretirement benefits
cost by $100 in each 1996, 1995 and 1994.
COMMITMENTS AND CONTINGENCIES
Various lawsuits arising during the normal course of
business are pending against PCC. In the opinion of
management, the outcome of these lawsuits will have no
significant effect on PCC's consolidated financial position.
SHAREHOLDERS' INVESTMENT
Authorized shares of common stock without par value
consisted of 50,000,000 shares at March 31, 1996, April 2,
1995, and April 3, 1994. Authorized and unissued series A
no par serial preferred stock consisted of 1,000,000 shares
at March 31, 1996, April 2, 1995, and April 3, 1994.
PCC translates the balance sheet of its foreign
subsidiary using the exchange rate at the end of the year.
The statement of income is translated using the average
exchange rate for the year. The effects of such
translations are included in the equity account "cumulative
translation adjustments."
STOCK INCENTIVE PLANS
PCC has stock incentive plans for certain officers, key
salaried employees and directors. The officer and employee
stock incentive plans allow for the granting of stock
options, stock bonuses, stock appreciation rights, cash
bonus rights and sale of restricted stock. Awards under the
officer and employee stock incentive plans are determined by
the Compensation Committee of the Board of Directors. The
time limit within which options may be exercised and other
exercise terms are fixed by the Committee. The directors'
plan grants options for 1,000 shares annually to each
outside director. Option prices of the plans to date have
been at the fair market value on the date of grant. When
stock options are exercised, the proceeds (including any tax
benefits to the Company arising as a result of the exercise)
are credited to the appropriate common stock and paid-in
capital accounts.
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</Page>
<PAGE>
At March 31, 1996, 1,267,000 stock incentive
plan shares were available for future grants and
327,000 stock incentive shares were immediately
exercisable. The outstanding options for stock
incentive plan shares have expiration dates
ranging from 1996 to 2006.
Changes during 1996, 1995 and 1994 in stock
incentive plan shares outstanding were as follows:
<TABLE>
<CAPTION>
_______________________________________________________________
Shares Price
_______________________________________________________________
<S>
<C> <C>
Outstanding at March 28, 1993 1,586,000 $ 4 to $26
Granted 239,000 13 to 21
Exercised (251,000) 4 to 20
Expired or cancelled (246,000) 11 to 26
_______________________________________________________________
Outstanding at April 3, 1994 1,328,000 4 to 26
Granted 208,000 22 to 25
Exercised (465,000) 4 to 24
Expired or cancelled (39,000) 11 to 26
_______________________________________________________________
Outstanding at April 2, 1995 1,032,000 11 to 26
Granted 189,000 29 to 40
Exercised (357,000) 12 to 26
Expired or cancelled (38,000) 11 to 23
_______________________________________________________________
Outstanding at March 31, 1996 826,000 $12 to $40
</TABLE>
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</Page>
<PAGE>
SHAREHOLDER RIGHTS PLAN
In 1988, PCC adopted a shareholder rights plan and
declared a dividend distribution of one right for each
outstanding share of common stock. Under certain conditions,
each right may be exercised to purchase 1/100 of a share of
series A no par serial preferred stock at a purchase price of
$135, subject to adjustment. The rights will be exercisable
only (i) if a person or group has acquired, or obtained the
right to acquire, 20 percent or more of the outstanding
shares of common stock, (ii) following the commencement of a
tender or exchange offer for 20 percent or more of the
outstanding shares of common stock, or (iii) after the Board
of Directors of PCC declares any person who owns more than 10
percent of the outstanding common stock to be an Adverse
Person. Each right will entitle its holder to receive, upon
exercise, common stock (or, in certain circumstances, cash,
property or other security of PCC) having a value equal to
two times the exercise price of the right. If, after a
person acquires 20 percent or more of the outstanding shares
of common stock, PCC is acquired in a merger or other
business combination in which PCC does not survive or in
which its common stock is exchanged, each right will be
adjusted to entitle its holder to receive, upon exercise,
common stock of the acquiring company having a value equal to
two times the exercise price of the right. The rights expire
on December 16, 1998, and may be redeemed by PCC for $0.01
per right at any time until a determination is made that any
person is an Adverse Person, or 10 days following the time
that a person has acquired 20 percent or more of the
outstanding common stock, or in connection with certain
transactions approved by the Board of Directors. The rights
do not have voting or dividend rights and, until they become
exercisable, have no dilutive effect on the earnings of PCC.
SEGMENT INFORMATION
PCC manufactures and markets metal parts in one industry
segment. Principal customers are manufacturers of aircraft
jet engines, industrial and marine gas turbine engines and
other industrial products, including pumps, compressors,
automotive components, devices for surgical bone repair and
replacement, electronics, fasteners, firearms and consumer
appliances.
Net sales included sales to General Electric in the
amounts of $121,600 in 1996, $92,600 in 1995 and $97,400 in
1994 and sales to Pratt & Whitney in the amounts of $90,800
in 1996, $72,600 in 1995 and $96,400 in 1994. No other
customer accounted for more than 10 percent of net sales.
Page 62
</Page>
<PAGE>
Export sales from the United States of $134,800 in 1996,
$108,900 in 1995 and $95,100 in 1994 were made principally to
customers in Western Europe. Total net sales to customers
outside the United States were $156,200 in 1996, $126,800 in
1995, and $107,200 in 1994 or 28 percent, 29 percent and 26
percent of the Company's sales in those years. Total net
sales and identifiable assets of PCC's foreign subsidiary
represent less than 10 percent of consolidated totals.
SUBSEQUENT EVENT
On May 31, 1996, PCC purchased 100 percent of the stock
of The Olofsson Corporation, a manufacturer of computer-
controlled metalworking machine systems. The purchase price
of $52,200 included new borrowings and the assumption of debt
totalling $42,000. The business is headquartered in Lansing,
Michigan, and will operate as part of PCC Specialty Products,
Inc.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of Precision
Castparts Corp.:
In our opinion, the accompanying consolidated balance
sheets and the related consolidated statements of income,
cash flows and shareholders' investment present fairly, in
all material respects, the financial position of Precision
Castparts Corp. and its subsidiaries at March 31, 1996 and
April 2, 1995, and the results of their operations and their
cash flows for each of the three years in the period ended
March 31, 1996, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
Page 63
</Page>
<PAGE>
overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion
expressed above.
/s/ PRICE WATERHOUSE LLP
____________________________
Price Waterhouse LLP
Portland, Oregon
April 25, 1996, except as to Note "SUBSEQUENT EVENT," which
is as of May 31, 1996
REPORT OF MANAGEMENT
The management of PCC has prepared the consolidated
financial statements and related financial data contained in
this Annual Report. The financial statements were prepared
in accordance with generally accepted accounting principles
appropriate in the circumstances and reflect judgments and
estimates with appropriate consideration to materiality.
Management is responsible for the integrity and objectivity
of the financial statements and other financial data included
in the report.
PCC maintains a system of internal accounting controls
to provide reasonable assurance that assets are safeguarded
and that transactions are properly executed and recorded.
The system includes policies and procedures, internal audits
and reviews by Company officers.
Price Waterhouse LLP, certified public accountants,
provide an objective, independent review of management's
discharge of its obligation related to the fairness of
reporting operating results and financial condition. Price
Waterhouse LLP performs auditing procedures necessary in the
circumstances to render an opinion on the financial
statements contained in this report.
The Audit Committee of the Board of Directors is
composed solely of outside directors. The Committee meets
periodically and, when appropriate, separately with
representatives of the independent public accountants and the
internal auditors to monitor the activities of each.
/s/ WILLIAM C. MCCORMICK /s/ WILLIAM D. LARSSON
_________________________ _________________________
William C. McCormick William D. Larsson
Chairman, President Vice President and
and Chief Executive Chief Financial
Officer Officer
Page 64
</Page>
<PAGE>
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
(Unaudited)
(In thousands, except employee and per share data)
___________________________________________________________________________
__________
1996 1995 1994 1993 1992
___________________________________________________________________________
__________
<S> <C> <C> <C> <C> <C>
Net sales $ 556,800 $ 436,400 $ 420,400 $ 461,400 $ 583,300
Net income $ 41,100 $ 29,000 $ 22,200 $ 1,800 $ 46,500
Return on sales 7.4% 6.6% 5.3% 0.4% 8.6%
Return on beginning
shareholders' investment 15.9% 13.0% 11.1% 0.6% 17.4%
Net income per common share $ 2.02 $ 1.45 $ 1.14 $ 0.07 $ 1.75
Cash dividends declared
per common share $ 0.24 $ 0.22 $ 0.12 $ 0.08 $ 0.08
Average shares of common
stock outstanding (000) 20,400 20,000 19,500 26,800 26,600
Working capital $ 125,800 $ 89,900 $ 125,700 $ 137,000 $ 187,100
Total assets $ 450,500 $ 406,700 $ 342,900 $ 424,300 $ 422,600
Total debt $ 13,900 $ 26,000 $ 15,700 $ 19,400 $ 26,200
Total debt as a percent of equity 4.6% 10.1% 7.0% 9.7% 8.3%
Shareholders' investment $ 303,100 $ 258,400 $ 222,800 $ 199,900 $ 315,400
Book value per share $ 14.76 $ 12.80 $ 11.31 $ 10.27 $ 11.82
Capital expenditures $ 19,700 $ 10,900 $ 7,400 $ 16,000 $ 28,800
Number of employees 5,646 5,166 3,993 4,341 6,372
Number of shareholders of record 2,327 2,480 2,750 2,580 2,942
Backlog of orders $ 539,700 $ 313,200 $ 280,200 $ 367,300 $ 523,500
___________________________________________________________________________
__________
</TABLE>
The Selected Financial Data have been restated, as
appropriate, to reflect the three-for-two stock split,
effective August, 1994.
Page 65
</Page>
<PAGE>
Quarterly Financial Information
(Unaudited)
(In thousands, except per share data)
<TABLE>
______________________________________________________________________
__________
<CAPTION>
1996
1st Quarter 2nd Quarter 3rd Quarter(1) 4th Quarter
______________________________________________________________________
__________
<S> <C> <C> <C> <C>
Net sales $137,200 $134,000 $127,700 $157,900
Gross profit $ 27,600 $ 27,300 $ 25,700 $ 30,100
Net income $ 9,400 $ 9,500 $ 11,800 $ 10,400
Net income per share $ 0.46 $ 0.47 $ 0.58 $ 0.51
Cash dividends per share $ 0.06 $ 0.06 $ 0.06 $ 0.06
Common stock prices:
High $ 35.25 $ 36.50 $ 40.00 $ 41.13
Low $ 25.88 $ 32.63 $ 34.25 $ 36.50
End $ 35.13 $ 36.50 $ 39.75 $ 40.00
______________________________________________________________________
__________
</TABLE>
<TABLE>
______________________________________________________________________
__________
<CAPTION>
1995
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
______________________________________________________________________
__________
<S> <C> <C> <C> <C>
Net sales $110,200 $102,800 $102,400 $121,000
Gross profit $ 19,900 $ 18,700 $ 16,800 $ 21,500
Page 66
</Page>
<PAGE>
Net income $ 7,500 $ 7,200 $ 6,400 $ 7,900
Net income per share $ 0.38 $ 0.36 $ 0.32 $ 0.39
Cash dividends per share $ 0.04 $ 0.06 $ 0.06 $ 0.06
Common stock prices:
High $ 24.25 $ 26.88 $ 27.50 $ 26.50
Low $ 20.58 $ 20.67 $ 18.00 $ 19.63
End $ 20.92 $ 25.63 $ 20.25 $ 26.13
______________________________________________________________________
__________
</TABLE>
[FN]
___________
(1) During the third quarter of fiscal 1996, the
Company recorded a tax benefit of $2,200 from the
settlement of a state tax issue, and a $400
benefit from a research and development tax
credit. The impact from the two items was equal
to $0.13 per share.
Page 67
</Page>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF PRECISION CASTPARTS CORP.
<TABLE>
<CAPTION>
State of
Approximate Percentage Jurisdiction
of Voting Securities Incorporation
Name of Subsidiary Owned or Organization
______________________________________________________________
___
<S> <C> <C>
PCC Airfoils, Inc. 100% Ohio
PCC Specialty Products, Inc. 100% Delaware
Advanced Forming Technology, Inc. 100% Colorado
Precision Castparts Corp.
- France, S.A. 100% France
PCC Composites, Inc. 100% Pennsylvania
</TABLE>
Page 68
</Page>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
the Prospectus constituting part of the Registration Statement
on Form S-3 No. 2-95890, to the incorporation by reference in
the Prospectus constituting part of the Registration Statement
on Form S-3 No. 2-95855, to the incorporation by reference in
the Registration Statement on Form S-8 No. 33-32367, and to
the incorporation by reference in the Registration Statement
on Form S-8, No. 33-40559 of Precision Castparts Corp. of our
report dated April 25, 1996 which appears on page 27 of the
Financial Section of the 1996 Annual Report to Shareholders of
Precision Castparts Corp., which is incorporated in this
Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial
Statement Schedule, which appears in Item 14(a)2 in this
Annual Report on Form 10-K.
/s/ PRICE WATERHOUSE LLP
______________________________
PRICE WATERHOUSE LLP
Portland, Oregon
June 28, 1996
Page 69
</Page>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
March 31, 1996 financial statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-03-1995
<PERIOD-END> MAR-31-1996
<CASH> 26200
<SECURITIES> 0
<RECEIVABLES> 83100
<ALLOWANCES> 1100
<INVENTORY> 105200
<CURRENT-ASSETS> 224100
<PP&E> 305000
<DEPRECIATION> 161200
<TOTAL-ASSETS> 450500
<CURRENT-LIABILITIES> 98300
<BONDS> 0
0
0
<COMMON> 20500
<OTHER-SE> 282600
<TOTAL-LIABILITY-AND-EQUITY> 450500
<SALES> 556800
<TOTAL-REVENUES> 556800
<CGS> 446100
<TOTAL-COSTS> 446100
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100
<INCOME-PRETAX> 63700
<INCOME-TAX> 22600
<INCOME-CONTINUING> 41100
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41100
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
